Through a Tough Year: Bitcoin Mining Proves to be Profitable
During the second half of 2018 and particularly December, the cryptocurrency market
entered a brutal winter where the bear market meant that bitcoin mining was no longer profitable. The bottom formation of bitcoin started on December 15 2018 with prices in the $3,100-$3,200 USD range. The bear run lasted 16 months, leading to unproductive bitcoin mining and causing miners to shut down their operations and sell off their hardware at a loss. On the other hand, many miners were forced to continue mining operations through the suffering market due to long-term deals with electricity companies and long leases in order to operate large-scale mining centers. It was not until this month that all their hardship has started to pay off (for those who have been HODLing).
Since the start of April 2019, bitcoin has been rallying to heights not seen since last year and
has hit a half-a-year high on the 15 th of April. Based on calculations by global market analyst Alex Kruger, bitcoin mining is once again profitable for investors for the first time since December. The breakeven cost on the bottom formation on December 15 was averaged around $3,150 before mining rig depreciation was included. Once included, the breakeven was calculated at $3,850 against a $3,200 bitcoin price. As of 15 April 2019 though, the breakeven costs ranged around $3,550 (before miner rig depreciation) and $4,350 (after miner rig depreciation) against a $5,250 bitcoin price. This means that for each bitcoin mined, there is a $900 dollar profit. This calculation was based on the assumptions that the electricity price were valued at 5.5 cents kWh, Antminer S9s were valued at $200 and the depreciation schedule at one and a half years. This power rate assumption is
significantly lower than what it costs in China where 80% of the world’s bitcoin is being mined meaning that (In Alex Kruger’s words) “An exact number is heavily dependent on electricity cost. e.g. last December Coingeek reported an electricity cost (inclusive of all operational expenses) of $0.073. I am using $0.055.”
With the rise of mining profitability also comes the rise of the hashrate of the entire bitcoin
network, signifying that more miners have been re-entering the market or even newly entering the market. According to BTC.com, the hash power of bitcoin has seen a 25% uptick from 36.55 Eh/s during mid December 2018, to 45.76 Eh/s during mid April 2019.
Alongside the once-again-profitable bitcoin mining also comes the accelerated ASIC miner
market which have been introducing the world to new generation mining devices. Last month, Canaan released their Avalonminer10 that is able to deliver a hashrate of 31TH/s with a power consumption of 1,736 watts. Bitmain also released their Antminer 17 series that delivers a hashrate ranging from 50 TH/s to 56 TH/s and operates at 42 W/Th to 45 W/Th days after Canaan released their Avalonminer10. To top it all, MicroBT released their staggering 72TH/s ASIC M20S.
Mining is what keeps bitcoin alive and is a key factor in the sustainability of cryptocurrencies
as a whole. A once-again-profitable mining ecosystem means positivity for the whole market
especially for POW (proof-of-work) blockchain networks. With assumptions that the bitcoin price does not drop below the $4,000 mark, more and more miners will start to join the market to reap its rewards just in time for the block halving of bitcoin scheduled for May 2020.