Bitcoin mining has been one of the most profitable businesses in recent years, and it appears that this trend is set to continue in 2023. A recent report from Hashrate Index reveals that New Mexico is the most profitable state for Bitcoin miners in Q1, with an estimated cost of $16,850 to mint one BTC. On the other hand, Hawaii is the most expensive state for mining, with a cost of around $114,590 per BTC.

The report indicates that the south and midwestern US states are the most attractive for Bitcoin miners in terms of electricity costs. In recent months, some states, such as Arkansas, Montana, Missouri, and Mississippi, have taken steps to protect crypto miners from excessive taxes and regulations. However, some states, such as Texas, have strengthened restrictions for crypto mining companies by amending their utilities and tax codes.

The report suggests that Bitcoin mining margins could grow further, based on the U.S. Energy Information Association's (EIA) expectations of energy price deflation. The agency expects the demand for electricity to drop by 1% in Q2, citing additional generation from renewable sources and cheaper natural gas prices. It also anticipates that natural gas prices will remain below $3 in 2023, compared to an average of $6.45 in 2022. This decrease in operational costs could help cash-strapped Bitcoin mining companies to survive in 2023.

Interestingly, the stock price of Core Scientific, an already bankrupt Bitcoin mining firm, has jumped over 450% YTD. Additionally, the HI Crypto Mining Stock Index has soared by more than 100% this year, indicating a return of investor appetite for mining stocks.

The researchers at Hashrate Index noted that if the Bitcoin price were to increase by an additional 40% to reach $42k this year, most mining stocks would rise by more than 50% from today's level, while the four-to-five biggest gainers would soar by more than 150%.

In conclusion, the profitability of Bitcoin mining is largely dependent on energy prices, and the expected energy price deflation in the US could lead to a boost in mining margins. The south and midwestern US states remain the most attractive for Bitcoin miners, with New Mexico emerging as the cheapest state for mining in Q1.