Bitcoin mining has seen a significant increase in production costs, with the average cost to mine a single Bitcoin rising by 47% in the fourth quarter of 2024, according to a new report from CoinShares. This surge brings the total average production cost to $137,018 per Bitcoin, significantly higher than previous periods. The report highlights several factors contributing to this rise, including accelerated hardware deployment, higher tax liabilities, and growing non-cash expenses such as depreciation and stock-based compensation.

The CoinShares industry report revealed that the average cost of mining Bitcoin among publicly listed companies jumped to $82,162 in Q4 2024. When factoring in non-cash expenses, including depreciation of mining equipment, the total production cost for the quarter reached an alarming $137,018 per Bitcoin. Excluding Hut 8, which experienced substantial tax-related costs tied to unrealized gains, the average cash cost was somewhat lower at $75,767.

Drivers Behind Rising Costs

The report attributes the rise in mining costs to multiple factors. The deployment of faster hardware, while essential for maintaining competitive mining operations, has led to higher expenses. Additionally, the competition within the mining sector is intensifying, which, combined with fluctuating market prices, has increased the overall cost of production. Furthermore, the rapid technological advancements in mining hardware mean that ASIC miners become obsolete faster, leading to accelerated depreciation and rising non-cash expenses.

For example, Hut 8, a notable player in the Bitcoin mining space, reported the highest unit cost in the dataset due to a massive deferred tax liability. The company also faced elevated interest expenses linked to its credit facilities, pushing the total per-Bitcoin cost beyond $281,000. Hut 8 is attempting to mitigate these costs by pledging 968 BTC to finance 30,000 Antminer S21+ ASICs, aiming to increase its self-mining hash rate and improve its overall efficiency.

Cost Reductions and Efficiency Gains

Despite the widespread increase in mining costs, some companies have managed to reduce their per-Bitcoin production costs. For instance, Iren managed to cut its electricity costs at the Childress facility by switching to spot pricing, reducing electricity costs per Bitcoin by 39%.

Other companies, such as Cormint, were able to lower total mining costs by 44% in Q4, largely due to a decrease in power prices to 1.8¢ per kilowatt-hour. These examples show that while the industry faces rising input costs, some players are still finding ways to improve efficiency and profitability.

Electricity and Non-Cash Costs Dominating Mining Expenses

Electricity remains the largest direct cost in Bitcoin mining, as miners continue to rely heavily on power-hungry ASIC machines to perform calculations. However, non-cash expenses, such as depreciation and amortization, are also significant contributors to the overall cost structure. This shift highlights the importance of maintaining high operational uptime and upgrading hardware efficiently to ensure that miners can stay competitive.

CoinShares’ data shows that despite rising costs, most miners were still able to operate profitably in Q4 2024, as Bitcoin’s price remained relatively stable at around $82,000. However, the second quarter of 2025 could bring more challenges for miners. Tariff increases on imported rigs from China and Malaysia are expected to range from 24% to 54%, which will likely push up breakeven costs for miners who rely on imported equipment.

Future Outlook for Bitcoin Mining

The broader outlook for Bitcoin mining appears challenging, with the industry facing multiple headwinds, including increasing hardware costs, rising electricity prices, and growing tax liabilities. Additionally, valuation multiples for mining companies are compressing, indicating investor concerns about the competitive nature of the sector.

To navigate these challenges, some miners are diversifying their operations by investing in data center infrastructure and high-performance computing (HPC) to generate revenue beyond Bitcoin block rewards and transaction fees. At the same time, the industry continues to improve hardware efficiency, with new ASIC models now averaging 20 watts per terahash (W/TH), a significant improvement from the 100 W/TH average in 2018. These advances in efficiency are helping to keep the total energy consumption of the Bitcoin network stable, even as the hash rate continues to rise.

CoinShares predicts that the Bitcoin network will cross the one zetahash per second (ZH/s) threshold by mid-2025, marking a new milestone for the industry’s growth. However, the cost pressures faced by miners are unlikely to ease anytime soon, and the industry will need to adapt to maintain profitability in an increasingly competitive environment.