Bitcoin miners are experiencing higher production costs, as surging energy prices and network hashrate have begun to eat into miners’ profitability. During the first quarter of 2025, the median cost to mine one Bitcoin skyrocketed to $64,000. This represents an increase from the $52,000 in Q4 of 2024. Look for this trend to climb ever higher. Projections indicate that costs may exceed $70,000 this quarter, largely due to a projected increase of more than 9% in direct production costs during the second quarter.

Despite Bitcoin now trading over $107,635, the increasing production costs are eating into profit margins for many miners. Even with these headwinds considered, the average miner is still operating with a healthy buffer.

Energy Prices Drive Up Mining Expenses

One of the biggest shocks raising the cost of production is rising energy prices. Terawulf recently experienced a dramatic increase in energy costs. In Q1, those costs skyrocketed to $0.081 per kilowatt-hour (kWh)—almost double the $0.041 per kWh indicated in the first quarter of 2024. This jump in energy costs was the primary driver behind Terawulf’s year-over-year increase in the cost to produce a Bitcoin.

Not surprisingly, in Q1, public miners continued to keep a wide median fleet hashcost consistent. It kept just under $34 per petahash per second (PH/s). Other companies, like Terawulf and Bitdeer, experienced a greater than 25% increase in their production costs. This massive growth highlights the gap in operations efficiencies and energy usage across mining firms.

There’s a catch. These production cost estimates often factor in Bitcoin earned through machines rented out to third parties. They fail to take into account the declining value of mining rigs themselves.

Network Hashrate and Production Costs

This increase in network hashrate was a factor increasing the cost of mining Bitcoin. When new miners enter the network, it becomes increasingly computationally difficult to mine bitcoins. Now it requires exponentially more energy and resources to mine the same number of Bitcoin.

"Direct production costs are expected to surpass $70,000 in the current quarter," - TheMinerMag

Bitcoin miners have been diversifying into other lines of business like AI hosting in recent months.

Market Performance and Investor Focus

The performance of mining equities has been wildly divergent, driving home the lesson that revenue diversification other than Bitcoin mining is paramount.

"The spread between the top and bottom-performing mining equities has widened significantly, underscoring growing investor focus on revenue diversification beyond Bitcoin mining." - TheMinerMag

At the time of writing, Canaan and Bitfarms have been the worst performers year-to-date, both down more than 21%. This divergence in performance highlights the increasing pressure on miners to find new revenue streams.