Block reward miners face the worst economics in BTC history

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Block reward miners are facing the worst economics in BTC history, pushing them to raise billions of dollars to fuel their AI expansion plans.

• Mining economics keep getting worse
• Q3 reports show revenue solid but profits can be elusive
• ABTC plunges as insiders dump shares post-lockup
• Bitmain under US Homeland Security investigation?

November was indeed the cruelest month for BTC miners, who faced the most unfavorable operating environment in Bitcoin’s (nearly) 17-year history. This week, JPMorgan (NASDAQ: JPM) analysts reported that mining profitability declined again last month, marking the fourth consecutive month of declining fortunes. The daily block reward gross profit was down 26% from October, while daily revenue dipped 14% (-20% year-over-year).

BTC’s fiat price tumbled from its all-time high of $126,080 on October 6 to $82,000 by November 21. Since then, it has rallied briefly, then fallen again to $84,500 on December 1, and rebounded yet again to over $93,000 by December 3. But the average all-in cost—including ASIC rig depreciation—of mining a single BTC token remains over $101,000, meaning this ball needs to bounce a lot higher (and stay there).

The Miner Mag reported that revenue per PH/s has fallen from $55 in Q3 to $35 today, well below publicly traded miners’ estimated $44 median all-in cost base. As the Miner Mag so eloquently put it: “At this level, profitability stress is no longer theoretical; it’s systemic.”

It hasn’t helped that the fees miners earn from the transactions in every BTC block have fallen to a 12-month low of around $300,000 per day, just 0.63% of overall miner revenue. Simply put, the long-term financial model envisioned by Bitcoin creator Satoshi Nakamoto—for transaction volume to rise and fees to eventually replace the block reward subsidy—has been broken by the market embracing BTC as ‘digital gold’ rather than ‘peer-to-peer electronic cash.’

Miners caught a modest break in late November as the network’s difficulty rate fell for the second time in a row. There’s a possibility of another rate cut at its next scheduled adjustment on December 11, but that’s no guarantee of profitability.

With the network’s hashrate hovering near record highs of 1,100 EH/s, miners’ timeline for recouping the cost of their newest rigs now exceeds 1,000 days, while the next halving—scheduled for mid-2028, which will reduce the block reward to just 1.5625 BTC—is only 850 days away.

Meanwhile, miners are on pace to take on a record amount of debt in Q4 as they ‘pivot’ to serving as AI data centers and other more reliably profitable high-performance computing (HPC) tasks. Many of these fundraising efforts offered investors far greater incentives than previous raises, underscoring the sense of urgency behind these pivots.

Debt/equity raises announced in the current quarter include Bitdeer (NASDAQ: BTDR) ($400 million); Bitfarms (NASDAQ: BITF) ($500 million); Cipher Mining (NASDAQ: CIFR) ($1.4 billion and $333 million); CleanSpark (NASDAQ: CLSK) ($1.15 billion); Hive Digital (TSXV: HIVE) ($300 million); IREN (NASDAQ: IREN) ($2 billion in debt and $1.6 billion in new equity); and TeraWulf (NASDAQ: WULF) ($3.2 billion).

Even assuming BTC continues to rise, things could get even worse for miners in 2026, as AI’s relentless expansion is pushing the cost of electricity ever higher. So-called ‘pure play’ miners who haven’t (yet) developed AI sidelines could find themselves struggling to maintain a positive narrative to keep investors from fleeing for more promising companies.

Q3 reports a mixed bag

Further insights into mining’s economic picture come from a handful of earnings reports that were issued after last month’s snapshots of their rivals’ Q3 performance.

We’ll start with Canaan Inc. (NASDAQ: CAN), which reported revenue of $150.5 million in the three months ending September 30, more than twice the Q324 figure and 50% better than this year’s Q2. Mining revenue was up 241% year-on-year to $30.6 million, a new company record, while sales of Canaan’s mining rigs rose nearly two-thirds to $118.6 million. Gross profit was up by more than three-quarters year-on-year to $16.6 million.

However, the cost of revenue was up over 47%, and the cost of mining was $34.1 million ($3.5 million higher than mining revenue). The result was an operating loss of $23.9 million and a net loss of $27.7 million, up from a $11.1 million loss in Q2 but significantly better than the $75.6 million loss in Q324.

On the ensuing analyst call, Canaan CEO Nangeng Zhang noted the “higher operational challenges” facing the mining sector but downplayed fears that the number of operators abandoning mining for AI meant the jig was up. Zhang said, “At this stage, deploying more ASIC Bitcoin miners is still the best way to allocate energy today and generate revenues.”

But while Canaan continues to search for cheap energy in the U.S. to build out its own mining sites, Zhang offered the caveat that “maybe we should have potential possibilities to transfer to the AI infrastructure in the future.”

Cango (NYSE: CANG), which only began mining last year but already boasts a deployed hashrate of 50 EH/s, reported its Q3 revenue up 60.6% sequentially to $224.6 million. Operating income totaled $43.5 million while net income hit $37.3 million.

While Cango has enjoyed great success in its brief run, it’s also in the process of developing its own AI/HPC network. Cango is building green energy projects in Indonesia and Oman that the company expects to come online “within the next one to two years.”

CleanSpark’s fiscal year concluded on September 30, and the company reported its FY25 revenue more than doubled to $766.3 million. CleanSpark booked a net profit of $364.5 million, a significant turnaround from the $145.8 million loss in FY24. It bears noting that $92.2 million of its profit came from gains on the value of its BTC treasury (which stands at 13,011 tokens as of December 3).

Speaking on CleanSpark’s earnings call, CEO Matt Schultz said the company has over 1GW of power under contract live in its data centers, with another 285MW coming online in Texas in 2027, along with “a multi-gigawatt pipeline of additional near-term opportunities.” Some of these latter sites are “excellent candidates for AI campuses,” which will allow them to “deliver scalable, resilient and energy-efficient capacity to meet demand from AI, cloud and enterprise workload.”

Schultz related a conversation he had with the CEO of Georgia’s public utility in which the latter said they enjoyed having mining tenants because of miners’ ability to shut down operations (and get paid by the utility for doing so) when the grid comes under strain.

This utility CEO therefore suggested that CleanSpark “consider blending AI, HPC, and Bitcoin mining, so a component of those loads remains interruptible. So we see it as a dual-pronged strategy. And I think you’ll see a lot of our sites will serve both loads.”

Hive Digital’s fiscal Q2 concluded on September 30, and the company reported record revenue of $87.3 million, up 91% sequentially and a whopping 285% better than the same period last year. Mining revenue more than doubled to $82.1 million as deployed hashrate rose 82.6%, while HPC revenue added $5.2 million, 7.6% better than Hive’s Q1 total.

But the costs of all this growth, including $38.3 million in depreciation of older mining rigs, resulted in a net loss for the quarter of nearly $16.5 million. The result would have been even worse absent the $4.5 million in fiat price gains on Hive’s BTC treasury, which currently stands at 2,201 tokens.

On Hive’s earnings call, which was recorded on November 17 when hash price was ~$44, CEO Aydin Kilic said Hive had a “break-even hash price” of about $22 and had upgraded its fleet of mining rigs “very intentionally, to be able to mine with positive gross mining margin through to the next halving.”

Kilic warned that “it will be telling to see what happens” if hash price continued to fall. Kilic predicted that “smaller scale miners, perhaps with less efficient machines, would likely be shutting off their hashrate capacity when we see hashrate in the $39-$40 range.” As noted above, that floor has since been breached.

ABTC tanks hard

The Trump-linked American Bitcoin Corp (NASDAQ: ABTC), which was spun out as a separate unit from miner Hut 8 (NASDAQ: HUT) earlier this year, reported revenue of $64.2 million in Q3, up from $11.6 million that Hut 8’s mining ops reported in the same period last year.

ABTC posted a profit of $3.5 million versus a loss of $600,000 last year, and this profit would have been $5.5 million higher were it not for a decline in the value of ABTC’s BTC stash (currently 4,004 tokens).

The share prices of most publicly traded miners took a pounding over the past 30 days as BTC’s value fell and investors cast a critical eye on the sector’s future. These slides ranged from merely painful (CleanSpark -17%) to brutal (Cango -37%) to ‘stop the ride I wanna get off’ (Bitdeer -45%).

However, ABTC suffered the largest decline over the past 30 days, falling 51.4%. ABTC’s misfortune was made worse by a nearly 40% plunge on Tuesday in which the shares fell 51% in just 26 minutes and trading volume spiked to 40x its daily average.

The culprit behind this plunge was insiders who were freed Tuesday from their lockup restrictions and (apparently) couldn’t hit the ‘sell’ button fast enough. Trading was halted several times as the market tried to get a handle on things, but the downward trajectory resumed moments after each restart.

ABTC executive chairman/Hut 8 CEO Asher Genoot tried to calm the waters, tweeting that the volatility was natural given that less than 5% of ABTC shares had been freely trading before Tuesday. Genoot said Hut 8, Donald Trump’s sons Don Jr. and Eric, and “our other founding partners are not part of this unlock, and continue to hold their shares.”

Eric tweeted his own assurance that he was “holding all” of his ABTC shares. However, this is only ABTC’s first major unlock, and if insiders continue to show the same lack of restraint that they did Tuesday, retail investors would be well advised to check the timing of these unlocks.

ABTC debuted on the Nasdaq on September 3 and hit a high of over $9 in its first week. At one point on Tuesday, ABTC was trading at $1.78, and while it rallied somewhat on Wednesday, its $2.39 close isn’t anyone’s idea of ‘winning.’

Hut 8, which owns 80% of ABTC, saw its own share price fall 27% over the past month but managed to escape Tuesday’s carnage relatively unscathed.

Bitmain under federal probe?

ABTC’s economics have been boosted by what some have termed a sweetheart deal with Bitmain, the world’s largest manufacturer of ASIC mining rigs. Bitmain’s dominant share of the market has been estimated at between 80%-90%.

In August, the Guardian reported that U.S. Securities and Exchange Commission (SEC) filings show ABTC obtained 16,299 rigs from Bitmain in exchange for a ‘pledge’ to provide Bitmain with $314 million worth of BTC within two years. Just a few months earlier, Bitmain told other customers they could make similar deals, but the deadline for delivery on these ‘pledges’ was six months, not 24.

Hut 8 and Bitmain had a history before ABTC was launched, and Hut 8 told Axios the pledge deal was made before Trump won the November 2024 presidential election. However, the transaction in question wasn’t revealed until August 2025.

Bitmain wouldn’t be the first ‘crypto’ firm to recognize the wisdom of making nice with the Trump family (and/or making them wealthier). Bitmain is also attempting to ingratiate itself with the administration by taking steps to transfer some of its rig production to U.S. shores, thereby bolstering the president’s narrative that his economic tariffs are bringing manufacturing back to America.

But in September, Rep. Zachary Nunn (R-IA) sent a letter to Treasury Secretary Scott Bessent questioning Bitmain’s U.S. plans, citing “potential national security considerations” if the Chinese company acquired “direct ownership of U.S. power generation assets.”

And last month, Bloomberg reported that Bitmain “has been the focus of a months-long federal investigation to assess whether its products post risks to U.S. national security.” The investigation, dubbed Operation Red Sunset and led by the Department of Homeland Security (DHS), was reportedly launched over concerns that Bitmain rigs could be ‘remotely controlled for spying or to sabotage the American power grid.’

The current status of the operation is unknown. Bloomberg reported that investigators took control of some Bitmain rigs as they entered U.S. ports, although it’s possible this was based on suspicion of companies evading U.S. tariffs. Regardless, Bloomberg said federal agents ‘pulled apart Bitmain machines to test their chips and code for malicious capabilities.’

Bitmain told Bloomberg that it wasn’t aware of any federal probe but called the idea that it could remotely control its rigs from China “unequivocally false.” An ABTC spokesperson said the company’s testing of Bitmain’s rigs found no remote access vulnerabilities.

ABTC added that its operations are “isolated, segmented, monitored and protected under a rigorous security framework,” and when Bitmain rigs “are deployed within modern industrial security standards, they do not present a credible risk to the United States power grid or to national security.”

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