Is Bitcoin Mining Profitable in 2022 – Forbes Advisor

2022 Global Inflationary Pressures Drive Up Bitcoin Demand

The combination of rising energy prices and falling cryptocurrency prices has made it much more difficult to profit from bitcoin (btc) mining.

Bitcoin prices have been volatile this year. while the original crypto soared to $69,000 in November 2021, it sank to $17,708 in June before recovering to its current trading level at around $23,000.

Reading: Is bitcoin mining profitable

Bitcoin mining profitability fell to multi-month lows in July, according to data from cryptocurrency tracking website

what is bitcoin mining?

Bitcoin mining is the process by which bitcoin is verified and recorded on the blockchain.

Bitcoin miners use powerful computers to complete complex mathematical functions called hashes. The processing power required to mine bitcoin is extremely high, but bitcoin miners receive a reward of 6.25 btc, approximately $143,000, for mining each block of transactions on the blockchain.

While anyone can technically mine bitcoins, most bitcoin mining is done by companies running large-scale commercial mining setups with specialized server data centers.

These mining farms are often built near affordable energy sources, such as hydroelectric dams, oil and gas wells, or solar power farms.

how has the profitability of bitcoin mining changed over time?

Aspects of the bitcoin mining business are similar to mining physical assets, such as gold or silver. the more asset prices rise, the more profitable mining becomes and the less efficient miners have to be to make money.

However, chris kline, co-founder and COO of bitcoin ira, points out that there are several factors to consider when it comes to the profitability of bitcoin mining in addition to the price of bitcoin itself.

“along with price, the profitability of crypto mining can be determined by a few different factors, in particular, rising electricity rates and rising gas and power prices, along with rising fees. transaction prices,” kline says.

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Bitcoin mining requires nearly 139 terawatt-hours (twh) of electricity per year, which is more than Norway’s annual energy consumption.

The more expensive electricity becomes, the less profit miners can make. Rising prices for oil and natural gas have increased the us. electricity prices by about 12.6% on average last year.

Despite pressures from rising electricity prices and falling bitcoin prices, there are at least a couple of trends that are moving in the right direction for bitcoin miners.

bitcoin mining equipment

the price of bitcoin mining equipment is an important factor in profitability. prices for upper- and mid-tier application-specific integrated circuit (asic) miners, the specialized chips made for bitcoin mining, are down about 70% from their all-time highs in 2022, when units sold for about from $10,000 to $18,000.

“GPU costs are dropping rapidly, which translates to higher mining profitability,” says kline.

Furthermore, Andy Long, CEO of cryptocurrency miner White Rock Management, says lower bitcoin prices result in less efficient miners shutting down operations when they start losing money. on the other hand, fewer total miners mean that more efficient miners start earning more bitcoins as prices drop.

“The genius of the system is the difficulty mechanism that automatically keeps block production going, with a new block every 10 minutes on average. so at lower prices, some miners will throw in the towel. but there will always be efficient miners with high-performance equipment that will continue to secure the network,” says long.

bitcoin network hash rate

To mine bitcoins, all computers connected to the bitcoin network are making millions of attempts to complete hashes every second of the day. A hashrate measures how many calculations can be performed per second, and this measurement can be in the billions, trillions, quadrillions, and even quintillions. one terahash, for example, equals 1 billion hashes per second.

Bitcoin mining profitability is quantified as hash price, measured in dollars per terahash (th) per second in the last 24 hours. if you put all that together, the acronym for that measurement is usd/th per second per day.

hash price calculation includes variables such as network difficulty, bitcoin price, bitcoin block allowance, and transaction fees.

Bitcoin profitability peaked at around $3.39/th per second during the crypto market boom in December 2017.

See also : 2022 Global Inflationary Pressures Drive Up Bitcoin Demand

bitcoin hash price reached $0.412/th per second at the end of October 2021. Currently, it has dropped to only $0.104/th per second.

While the profitability of bitcoin mining has declined, total mining activity remains near all-time highs.

The network hash rate is currently around 202.3 million per second, up from 72.9 million per second a year ago and 6.5 million per second in early August 2017.

bitcoin mining companies

As the profitability of bitcoin mining fell in 2022, the share prices of major crypto miners also fell. Fortunately, canaccord genuity analyst joseph vafi says that the most efficient bitcoin miners continue to make significant profits on their rigs.

“most of the leading mining companies in our coverage have a relatively new fleet that can remain profitable at a much lower btc price than current levels, as evidenced by a breakeven price of $7,000 to $9,000 for most of them by output incremental hashrate,” says vafi.

vafi’s top bitcoin mining stock picks include argo blockchain (arbk), hive blockchain technologies (hive), hut 8 mining (hut), and iris energy (iren).

“Overall, despite the sharp drop in btc spot price, the mining model is still very profitable for most leading miners,” says vafi.

canaccord genuity has “outperform” ratings for each of the four mining stocks mentioned.

Other major public bitcoin miners include Marathon Digital (Mara), Riot Blockchain (Riot), Canaan (Can), and Bitfarms (Bitf).

end result

There are several variables involved in calculating the profitability of bitcoin mining.

While many of those variables worsened during the crypto winter of 2022, the recession helped purge the market of less efficient miners and allowed the leaders of the pack to increase their market share in anticipation of what they expect. will be the next cyclical rise in cryptocurrency prices and crypto mining profitability for years to come.

Category: Bitcoin

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