Bitcoin price is falling and you might expect that there will be less crypto mining activity in the process. In fact, this isn’t exactly what happened. With the declining price of cryptocurrencies not to mention the rising hash rate, it goes to show the simple economics of crypto mining. Increased hash rate means that Bitcoin mining is still profitable for a lot of players.
Gone are the days when you can earn from mining activity using your own gear in your basement. Many professional businesses invested in high-speed chips and relocated to colder places and areas with cheap electricity. Some even invested in their own electricity infrastructure. And for this reason, large mining operations have been able to squeeze small players, especially in situations when Bitcoin’s price is trading around $6,000 level.
According to Marco Streng who is the chief executive officer of Genesis Mining, “There are still major expansions happening, especially from more efficient miners”. He also added that “The expansion is so big that it compensated for the drop-outs of not-so-efficient miners”.
Things have changed especially as algorithms being solved have become more complex than ever. The mining power needed for these scenarios have increased not to mention the reward is a limited supply and are in the hands of a few miners.
Genesis Mining has already stopped Bitcoin mining contracts that are no longer profitable. Instead, the company offered a premium account wherein members sign up and get stuck for the next five years.
Why Are Miners Staying?
If you are going to ask David Sapper, who is the chief operating officer at cryptocurrency exchange Blockbid Pty Ltd. in Melbourne, he believes that “The increased hash rate simply means that people are here for the long-term because they’re happy to accumulate what they have, potentially even run at a loss”. In addition to this, he also mentioned that “they do sometimes have to clear house and dump”.
There are various opinions surrounding the break-even price for cryptocurrency miners. There are those saying that miners would’ve stopped their operation if Bitcoin hits $5,000 level. As for Fundstrat Global Advisors, the research firm is saying that Bitcoin needs to stay afloat $8,000 in order to break even.
As for Morgan Stanley, he mentioned that Bitcoin should stay above $8,600 in order to remain profitable.
But of course, there are a lot of factors at play. Not all crypto mining operations are the same. Genesis Mining, for example, is currently expanding its capacity. Also, you see miners that develop and manufacture equipment also have the advantage over consumers.
According to Christopher Bendiksen and Samuel Gibbson wrote that “The efficiency of the hardware is rapidly increasing and the costs are coming down” they also added that “Miners are securing access to highly competitive sources of electricity. often ones that would otherwise lie idle, and show high degrees of mobility”.
There are many issues surrounding Bitcoin mining. It ranges from its energy-intensive nature, not to mention the environmental impact that is attached to the activity. Now, will Bitcoin miners stop mining in case Bitcoin price continues to fall?