READING BETWEEN THE LINES IS HOW WE KNOW WHAT'S HAPPENING

1. 📈 Increase in Difficulty

What is it? The Bitcoin network automatically adjusts to make it harder to find a new block (the mining process).

The Effect: As more miners and more powerful machines enter the scene, the competition is fierce and the "reward" each miner takes home is smaller. It's like searching for a needle in an ever-growing haystack.

2. ⚡ High Energy Costs

The Problem: Mining Bitcoin consumes a huge amount of electricity. To be profitable, the miner needs the value of the Bitcoin they extract to be greater than the cost of the electricity they consume.

The Effect: If the price of electricity rises or the price of Bitcoin falls, the profit margin decreases drastically or disappears. Electricity is the largest expense.

3. 📉 The "Halving" of Bitcoin

What is it? It's an event that occurs approximately every four years, where the reward miners receive for each mined block is cut in half. The last one was in 2024.

The Effect: Automatically, miners' income is halved, forcing the less efficient ones to turn off their machines if they cannot cover their electricity and operational costs.

In Summary: The Equation

Bitcoin mining is a business where:

$$\text{Profit} = \text{Value of Mined Bitcoin} - \text{Electricity Cost} - \text{Other Costs (Hardware, Maintenance)}$$

When the Value of Mined Bitcoin (reduced by the Halving and Difficulty) approaches or falls below the Electricity Cost, the less efficient miners (or those with expensive electricity) turn off their machines and stop mining.