Idled Bitcoin Mining Capacity Threatens Margin Trap

A report from Luxor estimates that nearly one-fifth of Bitcoin's total mining power is idle, with around 235 exahashes per second (EH/s) of capacity sitting completely dark. This unused capacity includes machines that are uneconomic, deliberately curtailed, in transit, or under maintenance.

The estimated 235 EH/s gap represents about 20% of the network's total ASIC capacity, according to Luxor's calculations. The firm notes that a machine needs better revenue, lower costs, or both to become operational again, while a deliberately curtailed device may already be usable but temporarily worth more when switched off.

The report highlights the challenges faced by Bitcoin miners in maintaining profitability, particularly during periods of high electricity prices. Luxor's data shows that the dollar-denominated hashprice rose 24.4% in August, from $31.63 to $39.33 per petahash per second per day, while Bitcoin's price increased by 24.5% over the same period.

However, the improvement in revenue may be short-lived, as a restart of idle capacity can trigger a brutal margin trap. The network's difficulty adjustment mechanism connects returning machines to the next potential margin squeeze, which can reduce the reward for restarting and make it even more challenging for miners to operate profitably.