Bitcoin Mining Hardware Cycles
Bitcoin mining computers are some of the fastest devaluing items in the world. At the peak of the market in 2021, a single S19 J Pro was being sold for up to $130/TH ($13,000). Today in 2025, that same unit may be sold for $3/TH ($300). Understanding Bitcoin mining hardware cycles can helps individuals be successful.
Timing The Market
In traditional investing, time in the market is important. In Bitcoin mining, timing the market is incredibly important. The equipment devalues quickly so being able to earn a return on your investment is incredibly time sensitive. From the moment you purchase your Bitcoin miner, profitability begins dropping dramatically.
Bitcoin network hashrate is usually trending up because as it appreciates in value, more participants come. More participants means more hashrate. Simultaneously, manufacturers are coming out with newer, more efficient machines. When older machines are retired, they are replaced with units that often have 2-3x more hashrate.
When you purchase your unit, you are racing to try and earn back as much value as possible, hoping to not only recoup your initial expenditure, but also make a profit afterwards. The window to do so is short because of the mining hardware cycle. Timing the market correctly can and will make all the difference.
Mining manufacturers are constantly releasing new and improved hardware, rendering older units obsolete. As network difficulty goes up, more efficient mining computers are needed in order for operators to remain profitable. The longevity of the equipment's relevance all depends on the costs of the operators. The higher the costs, the more efficiency matters.
Mining hardware is just as if not more volatile than the price of Bitcoin. Purchasing hardware at the height of the market makes it much harder to recoup your initial costs on it because the rate at which the profitability of the miner is decreasing is faster than at other points in the cycle. This is because the purchasing power of the revenue earned gets a lot smaller compared to your electricity costs. Being able to purchase equipment and get it online before the mania sets in massively improves miners chances of success.
Difficulty Adjustment
The Bitcoin difficulty adjustment is a mechanism that keeps the time between blocks consistent—about every 10 minutes—regardless of how many miners are on the network.
Every 2,016 blocks (roughly two weeks), the Bitcoin network adjusts the mining difficulty based on how fast or slow those blocks in that time period were mined.
- If blocks were mined too quickly → difficulty goes up.
- If blocks were mined too slowly → difficulty goes down.
This ensures that new Bitcoin is issued at a predictable rate, even as mining power (hashrate) fluctuates.
When difficulty is adjusted upwards, it means that the profitability for each miner decreases as it is indicative of more participants coming online competing for a scarce amount of mining rewards. When difficulty drops, the inverse happens. Difficulty is usually always trending upwards despite the mining rewards trending downwards due to the valuation (purchasing power) of Bitcoin.
Bitcoin price appreciation draws more individuals into wanting to mine Bitcoin which causes manufacturers to increase production of hardware to meet the demand. Betting that hashrate will slow down or drop over any extended period of time is a bad bet unless you have some magical way of predicting a black swan event which would cause a significant amount of hashrate to come offline for an extended period of time, or the production of new equipment to stall.
The difficulty adjustment is one of the most important concepts to understand for those looking to mine Bitcoin because it is one of the most important factors to try and model in order to predict future profitability. Short answer is that difficulty almost always continues to go up.
Market Liquidity and Miner Pricing
The reason why mining equipment became so expensive in the 2021 bull market was because demand outpaced Bitmain's ability to manufacture equipment. Despite incredibly inflated pricing, miners wanted to purchase equipment because on paper, it looked profitable. Even the most inefficient, old equipment had dramatic price increases.
In a down market, there are no liquidity crunches on hardware. Pricing is significantly less expensive. Manufacturers need to keep production high in order to hold their spot in line at Taiwan Semiconductor. It is the ideal time to try and purchase equipment at these times for multiple reasons. It's a buyers market where the buyer has a lot more control because there are more options. Timelines aren't as important, and it's easier to try and determine future profitability because you're theoretically already close to the floor on profitability.
The glut of machines on the market means that buyers have more options. In a bull market, the options dry up as there are more participants competing for a finite supply of mining computers and other infrastructure.
Determining profitability
The most important lesson to learn is that today's profitability does not determine tomorrow's profitability. Generally, the most advantageous time to buy is when the market is looking unattractive to enter. There are many mining calculators out there, but it's important to understand the factors at play.
The basics of it are: Daily Revenue-Electrical/Other Costs.
Daily revenue Other costs could include labor, loan payments, rents, maintenance, insurance, repair costs, and litany of other expenses. Choosing the correct equipment can make or break your success. Every machine that is broken and offline cannot generate revenue and will take away from your ability to make a return on investment.
It is almost impossible to accurately model what future profitability will look like because there are so many variables at play. Understanding your costs is absolutely paramount.
Quality of Machines
Getting the wrong batch of equipment can be catastrophic. You may think that having a cheaper, used model may be better because of a perceived lower ROI time, but you cannot ROI if the revenue you are generating is less than your overall costs. Profitability can swing quickly and is usually trending down over time.
Most mining scenarios require an extended contract that often doesn't allow for a lot of flexibility. Have equipment that is efficient enough to cover potential downside risk is huge, but also having equipment that works and won't constantly break is also huge.
You get what you pay for and the cheapest deal often isn't the best deal. At the same time, there can be a lot of risk in purchasing new equipment. It generally takes about a year to determine the quality of machines. This is because hardware will perform differently in different environments. Some will do better in heat and some will do better in cold. A year of operation allows you to experience all four seasons. The problem with this though is that if equipment has been out for a year, it will be less competitive.
The quality varies from all manufacturers. One model might be known as being good but there's a chance of getting a bad batch. Manufacturers are very tight lipped about the performance of their equipment they sell. Testing various models and manufacturers can be helpful instead of going all in on one model.
Different models require different infrastructure to run though which can make the process difficult. Being married to a specific model could make it more difficult to transition your infrastructure in the future for a server with a different form factor.
Some speculate that higher quality units are sold going into bull markets when manufacturers have more margin and justification to build higher quality units. All of this is speculative as there is very little transparency on the costs to produce machines from manufacturers.
Conclusion
Timing the market on hardware is important for individuals to maximize success in the mining market. Understanding the basics of profitability and costs will make or break individuals success. These are complicated and nuanced topics and being able to discuss them with experienced individuals can be invaluable.
If you would like get more information discussing various deployment strategies and the latest information on mining hard, feel free to reach out to me:
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