Mining Bitcoin May No Longer Be Profitable To Some Miners

epa06062673 (02/26) An employee resembles calculation board at a Bitcoin mine in Sichuan Province, China, 27 September 2016. China, the world's leader in Bitcoin mining, is dominating both the currency's generation and the global trade in the currency. Sichuan has become known as 'the capital of bitcoin mining' as entrepreneurial Chinese set up 'mines' there due to its abundance of hydropower, perfect for the high electricity needs of the large number of computers required for Bitcoin mining. Bitcoin mines are buildings with warehouse-like structures equipped with massive numbers of microprocessors with which 'miners' solve complex math problems and are rewarded in the digital currency. The industry exists in a legal gray zone in China, and the miners in this story, concerned about attention from the government, asked not to have their full names or the names of the villages where their mines are located mentioned in this story. EPA/LIU XINGZHE/CHINAFILE ATTENTION: For the full PHOTO ESSAY text please see Advisory Notice epa06062671

Some estimates show that Bitcoin mining may no longer be profitable to miners.

Thomas Lee from Fundstrat said the following in a report:

“The current cost of mining Bitcoin is no longer profitable to miners.”

“Normally, when the price for selling Bitcoin drops too low, the miners stop mining for a while.” Said the co-founder of Blockchain Intelligence Group, Shone Anstey.

The price for Bitcoin has dropped to the extent that it is no longer profitable to mine. The price of Bitcoin no longer covers for the cost of mining efficiently.

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The Cost Of Mining Bitcoin

Mining Bitcoin isn’t cheap. It is created through an intense energy consuming process that requires solving complex mathematical equations with high computing power. The Bitcoin is the reward miners get for completing the equations.

Just like with every other business, the goal of mining Bitcoin is to make a profit. If the money it takes to create it becomes more than the reward, the miners will lose money. The hardware required to mine Bitcoin run from several hundreds of dollars to a few thousand. And as time passes, more efficient, and expensive equipment is being developed.

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Miners need to replace their equipment from time to time to keep up with the technological trend. Statistics show that replacement accounts for half of what it costs to mine.

Fundstrat created a model for calculating the cost of mining Bitcoin and concluded that the break-even estimate isn’t encouraging to miners.

Miners also generate income from Bitcoin transaction fees. However, this has fallen lower than 50 cents from $34 between December and March.

The cost of mining Bitcoin is relative from one place to another since the cost of electricity and machinery differs from country to country. Miners who still have access to cheap electricity will make more profit than those who don’t.

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