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Electricity Cost Hurts Bitcoin Miners

crypto mining

Most Bitcoin mining activity can now be traced in China. Cheap electricity and a cold weather, these are things that most miners look for. However, it is also true that there are some regulatory action that can be done against these types of operations.

Aside from this, you also have to ask whether or not crypto mining activity today is still profitable. In reality, until December, things were looking good for miners. The returns were as high as 20% to 40% depending on the type of rig that you are using. But things changed considering 2018 marked the start of a bearish market for the entire crypto industry. Regulations changed the way countries look at cryptocurrencies.

And because of this, the profitability that miners generate also decreased significantly. In addition to the bearish market, you also have the rise in the difficulty of mining. This means that you need to invest in a more expensive powerful hardware if you wish to make the most out of your investment.

Electricity Cost

According to the research company Diar, it is the first time that crypto mining businesses are no longer making money from Bitcoin mining activity. According to the report, it is mainly because of the electricity bills that prevents miners from earning.

Diar predicts that Bitmain, one of the largest Bitcoin miners, will have to “swing” the hashrate for Bitcoin mining. This will help deal with the electricity cost and be able to make money from all of its locations. This is a strategy that is expected to be applied once Bitmain opens up three mining farms in the US by the coming months of 2019. And this means that Bitcoin mining is no longer done in a basement.

Morgan Stanley Analysts Agree

Morgan Stanley analysts agree with Diar. In February, they’ve pointed out that Bitcoin miners lose money whenever the price of Bitcoin goes below $8,600. According to Morgan Stanley, “The bitcoin mining hardware demand and price will decline further”.

Holding on To Bitcoin?

Perhaps miners are actually just holding on to their Bitcoin. At this point, many are still anticipating the possible bull run. One of the reasons for this is the possibility of having a Bitcoin ETF. A Bitcoin ETF can be a game changer considering the fact that it can easily attract institutional investors.

This isn’t far from reality considering how institutional investors are now slowly taking a closer look at Bitcoin and other cryptocurrencies. You now have banks teaming up with Ripple in order to lessen the cost of cross-border transactions.

Issues Surrounding Bitcoin Mining

There are a great number of issues surrounding Bitcoin mining today. One of the reasons is that it uses so much energy. In fact, collectively, crypto mining activity is already enough to power an entire country. And also, there are also some countries that won’t accept Bitcoin miners to exploit their low electricity fees. In Quebec, for instance, crypto miners need to pay a different rate compared to household consumers.

Today, miners have no other choice but to wait for the time when cryptocurrency goes up once again in order for them to generate profits from their activities.

Lee Jenkins

Lee is our resident cryptocurrency expert who knows the ins and outs of each coin and the blockchain technology behind them. You’ll find that most of our technical guides are written or overseen by Lee and they are all easily digestible by the new and experienced alike, so there is no better place to learn blockchain 101 than here. Occasionally you may see a news article from him if it’s tech related!