It is much harder to make money mining Bitcoin (BTC) now that both the price of energy and the price of cryptocurrencies are going up and down. In 2023, BTC made a comeback after a string of uncertain events, including the FTC’s fall, the crash of Terra Luna, changes in the economy as a whole, and Binance’s guilty plea.
In July 2023, BTC went up by an average of 0.39 percent. In the last few months of the year, it recovered a lot and was selling at around $38,000. On February 13, 2024, BTC reached $50,107 for the first time since December 2021. Its market value was $982.72 billion.
What Does Bitcoin Mining Mean?
Bitcoin is checked and added to the blockchain through a process called mining.
Bitcoin miners use very fast computers to do hashes, which are very complicated mathematical operations. It takes a lot of processing power to mine Bitcoin, but Bitcoin miners get 6.25 BTC, which is about $143,000, for each block of events in the system.
Technically, anyone can mine Bitcoins, but most of the mining is done by businesses with big commercial mining setups that include data centers with specialized computers.
Most of the time, these mining farms are built near cheap energy sources like solar farms, oil and gas wells, or hydropower dams.
How can make money from mining Bitcoin changed over time?
Some parts of Bitcoin mining are the same as mining for real goods like gold or silver. When the prices of assets go up, mining becomes more profitable, and miners don’t have to work as hard to make money.
Chris Kline, co-founder and chief operating officer of Bitcoin IRA, says that the price of Bitcoin isn’t the only thing that needs to be thought about when it comes to making Bitcoin mining profitable.
“Aside from price, a few other things can affect how profitable crypto mining is,” Kline says. “These include rising transactional prices, rising electricity rates, and rising gas and energy prices.”
It takes about 139 terawatt-hours (TWh) of power a year to mine Bitcoin, which is more than Norway uses in a year. The less money mines can make, the more expensive energy gets.
Even though the price of Bitcoin is going down and the price of power is going up, there are a few things that are going in the right way for Bitcoin miners.
Tools for mining Bitcoin
The cost of Bitcoin mining gear is a big part of how profitable it is. Application-specific integrated circuit (ASIC) miners are specialized chips made for Bitcoin mining. Their prices are down about 70% from their all-time highs in 2022 when units went from around $10,000 to $18,000.
“GPU costs are falling quickly, which means that mining is becoming more profitable,” says Kline.
Andy Long, CEO of cryptocurrency miner White Rock Management, says that when Bitcoin prices go down, miners who aren’t as good at their jobs shut down because they start to lose money. On the other hand, as prices drop, more efficient miners start to make more Bitcoin because there are fewer of them.
“What’s great about the system is that the difficulty mechanism keeps making blocks automatically; on average, a new block is made every 10 minutes.” Because of this, some miners will give up when prices drop. “However, there will always be skilled miners with powerful tools who keep the network safe,” Long says.
Hashrate of the Bitcoin network
All computers linked to the Bitcoin network try to complete hashes a million times a second, 24 hours a day, to mine Bitcoins. A hash rate tells you how many calculations can be done in a second. It can be given in billions, trillions, quadrillions, or even quintillions. As an example, 1 terahash is equal to 1 trillion hashes per second.
The hash price, which is given in dollars per terahash (TH) per second over the last 24 hours, shows how profitable Bitcoin mining is. That number is written as USD/TH per second per day if you put it all together.
Hash price is based on several factors, including the complexity of the network, the price of Bitcoin, the block support for Bitcoin, and transaction fees.
During the December 2017 crypto market boom, Bitcoin was making the most money, around $3.39/TH per second.
In late October 2021, the hash price for Bitcoin was as high as $0.412/TH per second. Bitcoin mining isn’t as profitable as it used to be, but the total amount of mining is still very high.
There are now about 520.0 million TH being hashed every second on the network. This is up from 7.65 million TH per second in early August 2017.
Companies that mine Bitcoin
Since 2022, when Bitcoin mining stopped making money, the share prices of the top crypto miners have also gone down. Analyst Joseph Vafi at Canaccord Genuity says that the most efficient Bitcoin miners are still making a lot of money from their rigs.
Vafi says, “Most of the top mining companies we cover have a relatively new fleet that can still make money at a much lower BTC price than current levels. This is shown by the fact that most of them have a breakeven price of $7,000 to $9,000 for incremental hash rate output.”
Four of Vafi’s top picks for Bitcoin mining stocks are Iris Energy (IREN), Hut 8 Mining (HUT), Argo Blockchain (ARBK), and HIVE Blockchain Technologies (HIVE).
Vafi says, “Overall, despite the sharp drop in the spot price of Bitcoin, the mining model is still very profitable for most of the top miners.”
Each of the four mining stocks that were talked about has an “outperform” rating from Canaccord Genuity.
Marathon Digital (MARA), Riot Blockchain (RIOT), Canaan (CAN), and Bitfarms (BITF) are some other big public Bitcoin miners.
In the end
There are a lot of factors that go into figuring out how profitable Bitcoin mining is.
During 2022’s “crypto winter,” many of these factors have gotten worse. However, the downturn has helped get rid of the least efficient miners and given the market leaders a chance to grow their share of the market in preparation for what they hope will be the next cyclical rise in crypto prices and crypto mining profitability in the years to come.
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