Every Reason Why Crypto Mining Is Still Profitable

June 24, 2019 - Expert Commentary, How-To Articles

Bitcoin Mining Profit

Here is the million-dollar question: is crypto mining still viable? That is perhaps the first question that pops up in the mind of every prospective cryptocurrency miner. By all rights, this is a reasonable question. A question that every investor shouldn’t shy from asking. 

Unfortunately, straight yes or no answers are hard. While cryptocurrencies are known for their volatility, price fluctuation, nonetheless, presents an opportunity for those willing to take the volatility bulls by the horns. The Bitcoin market, despite the doldrums of 2018, now has deep liquidity and tapered volatility. It is now more tempered and participants are global, comprising governments appreciative of the underpinning technology, the blockchain. 

In determining the feasibility of cryptocurrency mining, an individual keen on getting his/her feet wet should ask one important question: Will the combined cost of Bitcoin mining be below or exceed the spot open market rate of BTC?  If the answer is yes, then that will be a green light to proceed. 

That will involve buying the best Bitcoin mining hardware, selecting the best Bitcoin mining software, joining the best mining pool and getting started. Alternatively, one can sign up and purchase hash rate from a trusted, reliable and transparent Bitcoin mining provider. 

Factors that Affect Bitcoin Mining Profitability

The profitability of Bitcoin mining depends on several variables. A would-be Bitcoin miner should consider the following before committing:

1. Hash Rate or Hash Power

Bitcoin’s consensus algorithm is based on Proof of Work. Here a successful miner (or a pool) is supposed to solve a complex mathematical problem called a hash function roughly every 10 minutes before being rewarded with newly minted BTCs and transaction fees. 

The Hash Rate is a measure of how fast a miner or a computer can compute a hash function per second. It is a gauge of how “strong” the mining gear is and is directly proportional to profitability. 

The higher the hash rate of a crypto miner, the faster it will guess the hash, solving the cryptographic problem and being rewarded with Bitcoin and transaction fees, the ultimate aim for all miners. 

Overly, the hash rate of the Bitcoin network indicates the amount of computing power that must be committed for it to be fully operational. If a miner desires to upgrade and buy new gear with a better hash rate for more gains, money must be spent. This triggers an arm race sort of thing where miners will always invest in the best crypto mining equipment as the more they contribute, the more rewards they receive. Stagnation means low hash rate (relative to mining difficulty) and therefore, a drop-in pecking order and thus low rewards.

2. Hardware Costs

Note this: The days of mining BTC using a simple GPU miner are long gone. Nowadays corporates have a vested interest and are investing huge sums, building data centers fitted with the latest high hash rate miners, pushing you out. 

If you are unfazed, a modern ASIC miner will set up back upwards of $2,000 but soon that will be chunk because manufacturers keep improving. But that is not all. They are expensive but the demand is so high. ASIC miners are scarce. You must pre-order them.

3. Mining Difficulty

This is directly tied to hash power, which is also determined by the number of mining nodes. The more, the higher the mining difficulty. The reason why a miner must keep tabs with mining difficulty is because this parameter regulates the number of Bitcoins released into the BTC ecosystem. 

Mining Difficulty ensures that the rate of emission is steadied so that the 21 million mark is not reached too fast even if there is an influx of miners. If it shoots higher as new, efficient, high hash-rate miners are unleashed to the network, one’s profitability will sink as the network readjusts and automatically pumps up the mining difficulty which minimizes the chance of earning BTCs. 

Mining Difficulty is hard coded in the Bitcoin algorithm and is updated every after 2016 blocks.

4. Electricity costs

We cannot emphasize this enough. ASIC miners are energy-hungry hogs that consumes power for processing and cooling. Electricity rates, that is, cost per KWh, are set by the electricity generator and distributor.  

Ask yourself, how much will you pay to cover electricity costs if you mine from home and will you break even from BTC’s spot rate? Will that pain you? Electricity costs vary from one zone to another. An approximate in most countries is roughly $0.08/KWH but it could drop to $0.003/KWHs depending on what you bring to the table in some areas. If BTC prices drop too low, then it will be inconceivable to mine. 

In 2018 crypto winter, the $6,000/BTC mark was considered the base mark. When prices dropped below this mark, many miners switched off their gear as electricity costs made their operations futile.

5. Bitcoin Rewards

At the moment, every successful mining pool earns 12.5 BTCs for every block mined down from 50 BTCs in the early days of mining. However, this will drop by half in May 2020 to 6.25 BTCs. If the resulting scarcity will push prices higher, BTC mining will be lucrative. Conversely, any drop of BTC prices coupled with low rewards could push many miners out of operation.

6. Bitcoin Price

The reason why miners are in business is that they want to reap profits from holding BTC. Supporters claim that the number of BTC in circulation, aside from other regulatory or technical factors, is enough to justify the $1 million mark in the next 10 years. 

If that is the case, then BTC is presently undervalued, and it is justifiable to mine. However, before then, BTC’s price is a variable that must be considered. At constant electricity prices, any price below $5,000 a pop means mining of any form-and that is without adding the cost of gear, is untenable.

Risks of Crypto Mining

Aside from the above, there are other risks. Local laws can change, banning cryptocurrency mining or trading, for instance. 

Others, unless a miner is a holder, include the cryptocurrency exchange gets hacked or banned. That’s not forgetting shift in regulation preventing import of mining gear. These can deal a blow to a prospective miner.

The Cost of Bitcoin (BTC) Mining

Evidently, available choices are limited and the only way to mine Bitcoin profitably is through Application Specific Integrated Circuit (ASIC) miners. ASICs are tuned for one main purpose: mine Bitcoin. But because their chipsets are pushed to the limit, they are power intensive, and that is a factor that most would-be miners do not consider. 

At spot rates and even if laws are favorable, it is still difficult to make money off solo Bitcoin mining. Odds are stacked against you. 

Here is what we’re talking about:

Say you are mining with the latest ASIC, Bitmain Antminer S17+ that was bought at $2,140 with a hash rate of 73 TH/s but consumes 2920W per hour paying $0.08 KWh in electricity and paying two percent in mining pool fee. Bitcoin’s hash rate stands at 101.72 EH/s and a difficulty of 12,720,005M. At spot rates, it means a miner will earn $7.07 per day and will break even less than a year-earnings will be $2,579.43. If prices drop, the break-even spot will take longer and vice versa. 

A Hardware Mining Company For Bitcoin Mining Is a Viable Option

As a way out, one can easily and freely register and mine from a trusted Bitcoin mining provider who leverages efficiency and economies of scale by pooling initially building a facility and then renting out hash rate from a pro-Bitcoin mining jurisdiction. 

A reputable mining provider usually has all factors considered and offer several low-cost packages that will save you from electricity costs and technical know-how of getting started or streamlining processes. 

An example is Advanced Mining that is based in the United States. Moreover, there are several hash-rate packages to choose from. In fact, within a week, one can begin earning after purchasing a hash rate package from as low as $150. Advanced Mining ensures that only the latest energy-efficient miners are used.

A screengrab from Bitcoin mining calculator is as below:

So, is Bitcoin mining profitable? Yes. Provided it is done using energy efficient, high hash rate but expensive gear or via a trusted customer facing Bitcoin mining provider, and Bitcoin BTC prices maintain an upward trajectory.

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