Rising Network Difficulty Offsets Benefits of Bitcoin Price Appreciation

According to data compiled by theblock.co, April brought another disappointment for Bitcoin miners: their combined revenue totaled $1.18 billion, down $40 million compared to March’s figure of $1.22 billion. This marks the fourth consecutive month, starting from December, that the mining industry has recorded declining revenue, despite rising Bitcoin prices and an increase in hashprice — a key indicator of mining profitability. This paradoxical situation, where improved market conditions don’t lead to increased revenue, indicates structural changes in the Bitcoin mining industry and intensifying competition amid record network difficulty.

Revenue Decline Details: Moderate but Persistent Downturn

Although April’s drop in miners’ revenue wasn’t dramatic, it confirms the persistent downward trend in the industry’s earnings. In April, miners’ total revenue amounted to $1.18 billion, including both block rewards and transaction fees. Of this amount, fees accounted for $15.65 million. For comparison, in March, total revenue reached $1.22 billion, representing an exact decrease of $40 million in April.

Interestingly, transaction fees in April were slightly higher than in March, when they totaled $15.11 million. This indicates that the main decline came from block mining rewards rather than user fees.

“A four-month consecutive decline in revenue is a significant trend, even if each individual drop seems moderate,” explains Svetlana Moiseeva, a cryptocurrency market analyst. “The cumulative effect of this downturn is becoming increasingly noticeable for miners, especially those operating with high operational costs.”

According to historical data, the post-halving period typically sees consolidation in the mining industry, when less efficient operators are forced to either upgrade their equipment or exit the market. The current situation, characterized by a moderate but steady decline in revenue, could be a harbinger of a larger adjustment, particularly if the trend continues over the next few months.

The Paradox: Declining Revenue Despite Improving Market Indicators

One of the most paradoxical aspects of the current situation is that the decline in overall miner revenue is occurring amid growth in key profitability indicators. April’s downturn coincided with a higher BTC price compared to the previous month and an increase in hashprice — the projected daily yield for 1 petahash per second (PH/s) of SHA256 computing power.

On April 1, the hashprice hovered at $46.88, whereas by May 1, it had risen to $50.26. This represents an increase in potential earnings per unit of computing power of approximately 7.2% over the month. All other things being equal, such an improvement should have led to an increase in miners’ overall revenue, but this did not happen.

“This paradox is explained by the dynamics of network difficulty and hashrate distribution,” explains Dmitry Volkov, CTO of a major mining company. “When hashprice rises, it incentivizes more miners to turn on their equipment or upgrade to more efficient models. As a result, the network’s overall hashrate increases, leading to higher difficulty and, consequently, lower profitability for all participants.”

This cyclical dynamic is one of the fundamental features of Bitcoin mining, ensuring the system’s self-regulation. However, in current conditions, as the market is still adapting to the aftermath of the halving, these cycles become more pronounced and can create additional challenges for industry participants.

Network Difficulty as the Key Obstacle

Despite the positive dynamics of Bitcoin price and hashprice, miners are facing a formidable obstacle: record-high network difficulty. This metric currently sits at a historic high of 123.23 trillion. Network difficulty automatically adjusts every 2016 blocks (approximately every two weeks) to maintain the target block time of 10 minutes.

High difficulty means that miners need to perform more calculations to receive rewards, leading to increased costs for electricity and equipment while maintaining the same level of income. With average block times slowing, the next scheduled difficulty adjustment on May 4, 2025, is projected to ease the strain by an estimated 5.47%.

“Miners are currently in a kind of trap between the halving, which reduced the block reward, and record network difficulty,” notes Anna Krylova, an analyst at an investment company specializing in crypto assets. “A 5.47% reduction in difficulty is good news, but it only partially compensates for the current challenges. Restoring balance may require several consecutive downward adjustments.”

Historically, network difficulty tends to continuously increase with periodic downward adjustments that usually coincide with periods of low mining profitability. The current situation may indicate the beginning of such an adjustment cycle, where less efficient miners temporarily shut down their equipment, leading to a decrease in overall hashrate and, consequently, a reduction in difficulty.

Outlook and Survival Strategies for Miners

In the current environment, Bitcoin price appreciation remains one of the few positive factors for miners. Although monthly earnings have declined, the contraction has been relatively mild. Nevertheless, as miners navigate thinning margins and rising operational thresholds, the market subtly hints at a shift in equilibrium.

“Efficiency is no longer an additional advantage—it’s a necessary condition for survival,” emphasizes Michael Gennadiev, head of research at a blockchain-focused consulting firm. “Miners who cannot optimize their operations and reduce electricity costs will gradually be pushed out of the market.”

Miners have several strategies to adapt to current conditions:

1. Equipment Modernization: Investing in more energy-efficient ASIC miners can reduce operational expenses and increase competitiveness.
2. Diversification into HPC and AI: Some mining companies are considering using their infrastructure to provide high-performance computing services and support AI projects.
3. Geographic Optimization: Relocating operations to regions with cheaper electricity and favorable regulatory climates.
4. Hedging through Derivatives: Using financial instruments to mitigate risks associated with Bitcoin price volatility.
5. Consolidation and M&A: Merging with other players to achieve economies of scale and reduce unit costs.

“We expect a wave of industry consolidation in the coming months,” predicts Krylova. “Larger and financially stable miners will acquire assets from less efficient competitors, leading to further concentration of hashrate.”

In the long term, the health of the mining ecosystem depends on finding a new equilibrium between Bitcoin value, network difficulty, and operational efficiency. The current revenue decline, while concerning, is part of the natural adaptation process to the changed post-halving conditions. Miners who can survive this period of consolidation will likely be rewarded in future cryptocurrency market growth cycles.