The cryptocurrency market is one of the most discussed topics of recent years. Many investors are dreaming to make money on cryptocurrency, but does mining always bring the desired profit?
Every year, miners around the world are faced with the same question – is it profitable to mine this year, what are the prospects for this industry. In this article we will look at mining prospects in 2019.
What determines the profitability of mining cryptocurrency?
If you are new to cryptocurrency issues, then first you need to understand that mining means cryptocurrency mining. Through the use of computing power, the miners find new blocks in the network and receive a reward for this in the form of a certain amount of cryptocurrency.
Most likely you have already heard that mining is a costly business, so if your goal is to generate income, then the first thing you need to determine from which will depend the very income.
Mining profitability is influenced by 5 fundamental factors :
- Cryptocurrency rate . The pattern is simple – the higher the value of the coins, the higher the profitability of mining. But this is more relevant for those who mine in order to output cryptocurrency in the short term. If you are set to long-term mining, the fall in the course is not a reason for panic. All you need is to continue mining and do not rush to merge coins. If you focus on Bitcoin , then after reducing the price and period of instability, usually the rate returns to the previous indicator.
- The amount of remuneration . The reward for the found block is set individually for each cryptocurrency. On the one hand, this is a fixed value, and on the other hand, it tends to decrease continuously. Most cryptocurrencies use the so-called halving – this is a mechanism for reducing the miner remuneration rate by half. Usually halving is a planned event that the miners will know in advance. Thus, the last bitching of bitcoin was held in 2016, while the award for the found block was reduced from 25 BTC to 12.5 BTC. The next decrease is planned for 2020.
- Block generation time . The more blocks you can generate a network, the higher the income of miners. For example, in the Bitcoin network, blocks are generated on average every 10 minutes, which allows you to get about 144 blocks per day. For comparison, Ethereum allows you to generate 270 blocks per hour.
- Network complexity . This figure directly depends on the hashrate , that is, the total number of miners in the network. The more miner rivals have, the harder it is to find a block and, accordingly, less chance of getting a reward. In practice, this pattern looks like this: every 10 minutes, the Bitcoin network miners have the opportunity to extract 12.5 BTC, then this amount is distributed among all the miners of the network. The income of each individual miner will of course differ significantly if there are 100 miners or 50,000 miners active in the network.
- Power equipment . An important factor, but not fundamental. Yes, the power of the equipment provides you with competitiveness among the other miners of coins, but paying attention to the factors described above, you should understand that the presence of even the most powerful and modern equipment does not guarantee remuneration, but only increases the likelihood of effective mining. Moreover, taking into account periodic halvings, miners can receive a smaller reward using the same powers. In theory, in order to keep your share of income at the same level in the context of a constant increase in the number of miners, you need to regularly increase the number of used capacities. It is difficult, costly and unrealistic.
Thus, the profitability of mining depends not only on the used capacity, as many mistakenly believe, but on the totality of a number of fundamental factors and the global market situation. In this case, do not forget about the costs of mining, which will affect the level of your income. This will be discussed further.
The cost of mining Bitcoin
The main component of the cost of mining – the cost of electricity and the cost of equipment. In this case, the price of electricity often plays a crucial role in the profitability of mining in 2019. Energy costs account for about 85% of all mining costs. Knowing these nuances, mining companies try to locate their equipment in the countries with the cheapest electricity prices.
Not so long ago, Elite Fixtures company conducted a bitcoin mining cost analysis in different parts of the world. The basis for electricity prices in 114 countries and the technical characteristics of Antman S9, which is most often used for mining Bitcoin.
The study revealed that the most expensive mining in South Korea. Here, mining one Bitcoin coin will cost you $ 26,000. But the cheapest mining in Venezuela, where Bitcoin can be mined for only $ 531. It is also worth noting that according to the results of the study, in most of the countries analyzed, to mine bitcoin turned out to be inappropriate due to high electricity prices.
Much to our surprise, the main capacities of large mining companies are located not in Venezuela, but in China, where the cost per 1 kWh averages $ 0.03. Here are the largest pools AntPool , F2Pool and BTCC , which account for about 60% of the total computing power of the Bitcoin network.
The famous cryptanalyst Alex Kruger also published his version of the cost of mining Bitcoin . According to him, the average cost of mining Bitcoin in 2019 vary in the range of $ 3,550. He based his calculations on an average electricity price of $ 0.055 and an Antminer S9 price of $ 200. With the current rate of about $ 8,000, miners can earn from $ 3,000 for each mined coin, which is not so bad.
It is worth noting that the price of equipment is also changeable. Every time when the price of Bitcoin rises and miners are activated, the suppliers of mining devices do not miss their chance to earn extra money. In moments of hype, users are ready to pay any money for the equipment. So, in 2017, the price of Antminer S9 reached $ 5000 and above. Therefore, for the purchase of equipment it is also worth picking the right moment.
The expediency of mining can be calculated independently. To do this, there are many services that in just a few seconds will show you the mining profitability in 2019. To do this, you will need to enter several parameters (the price of Bitcoin, the cost of equipment, the price of electricity, hashrate, power consumption of equipment, etc.). Among the most popular services for calculating the profitability of mining should be noted Cryptocompare, BitcoinWisdom, My Crypto Buddy, Nicehash, WhatToMine, etc.
You should not lose heart if you see negative indicators when calculating profitability. As mentioned earlier, mining is increasingly difficult to make profitable, so sometimes it's easier to just buy coins with the same money, but in the long run it is more profitable to invest in cloud mining services .
Statistics 2018
Before making a decision on any investments, and mining is in any case investments, among other things, it is necessary to take into account the experience of previous periods. This data will always help you to see the pitfalls of mining in 2019 and prepare you for possible unexpected turns.
It should be noted that the profitability of miners in 2018 was a failure as never before. Despite the positive trend of increasing profitability, the collapse of the course and the increase in electricity prices significantly affected the profitability of mining.
According to the research company Diar , which specializes in cryptocurrency market research, Bitcoin miner revenues in 2018 were $ 4.7 billion. This is $ 1.4 billion more than in 2017.
But despite such a beautiful picture, the net profit of miners during 2018 for the first time in all years approached the zero mark. According to Diar, almost all of the miner's profits went to cost.
Among other things, the rate of Bitcoin fell by more than 70%, which also put tremendous pressure on the miners. In such conditions, many small pools for mining were forced to cease their activities and leave the market. In view of the decrease in profitability, the major players began to reduce their capacities in order to at least somehow hold above the break-even point.
The collapse of the market also did not bypass the manufacturers of equipment for mining. One of the leaders of the market, the company Bitmain, suffered a difficult last year. At first they had to postpone their plans for the initial public offering on the Hong Kong Stock Exchange. Thus, Bitmain deprived itself of the expected profit of about $ 3 billion, which is expected to attract through the IPO .
In addition, Bitmain, postponed the opening of a data center in Texas, which involved the creation of more than 400 jobs. And closer to the end of the year, due to the fall of the market, company representatives reported a forced reduction in staff. Optimization touched all areas of Bitmain's business, and this is not only the production of mining equipment, but also the management of Antpool's largest Bitcoin pool.
The largest manufacturer of video cards and chips for miners, Nvidia, also announced a decrease in demand for graphics processors from the miners. As a result, by reducing revenues, the company's shares by the end of the year fell by about 19%.
Thus, the total drop in profit of miners since the beginning of 2018 was 83%. Such a situation caused a great panic in the crypto community and made me seriously think that the mining era is coming to its logical conclusion.
Mining prospects in 2019
In 2019, the situation on the crypto market drastically changed – the Bitcoin rate has more than doubled since the beginning of the year, and the demand for miners has returned to previous levels.
At the same time, the overall profitability of mining has also grown since the beginning of the year and reached a semi-annual maximum in April.
According to the analytical portal Messari.io , this year the commission income of miners Bitcoin is 8 times higher than that of miners of other cryptocurrencies. On May 10, in just one day, Bitcoin miners earned more than $ 580,000, while Ethereum miners earned only $ 68,000, and Litecoin earned $ 1,100.
In the opinion of Nikita Korovin, the head of the MINE Lab service center, bitcoin mining again returned its former glory and became a profitable investment. Buying equipment for mining has acquired a new meaning, as in the current conditions it will pay off in a matter of months. Although, as you remember, last year their payback was not at all comforting.
Now the payback of the Antminer S9 will be about 5 months, and if you use the Canaan Avalon 851, then the break-even point will be reached in about 7 months. The expert also advised to use the used models S9i and S9j, which will require less depreciation costs and will break less in comparison with the base model.
The founder of the Bitcluster mining hotel, Sergey Arestov, advises buying a new generation of devices on 7-nm chips, which are capable of delivering more hashrate at much lower power costs. According to him, in the next few years, such miners will be the most relevant.
He also noted that the net profit from mining on Antminer S9 is now more than $ 90 per month. And this figure may be higher if you have time to purchase equipment during the crisis period for the market. For example, at the end of 2018, when the mining profitability set antirecords, the used S9 could be purchased no more than $ 200.
In addition, in 2019 it continues to be in trend mining with minimal investment. Due to market volatility, many investors are afraid to invest in mining large sums. Due to this, cloud mining was developed (the best option for mining cryptocurrency for 2019). This method of mining coins is suitable for those who are not ready to invest large sums in the purchase of equipment, bother with its settings and incur additional costs associated with maintenance, rental of premises and so on.
In addition, as an alternative to traditional mining, mobile mining was developed. This innovation has recently entered the market. Mobile mining implies cryptocurrency mining through a mobile device using applications. Of course, for mining Bitcoin, this development will not work, but practicing on other altcoins will be very useful. For mining, you only need to download the application in accordance with the OS of your smartphone and start earning.
In general, the main cryptocurrency mining foresees a bright future for 2019, but there are a number of factors that can affect the profitability of mining both positively and negatively. If you are going to seriously engage in mining, you just have to know about them:
- Bitching bitcoin in 2020 According to Bitcoinist editions, previous cryptocurrency halvings have always caused sharp exchange rate fluctuations. And as you remember, the increase in the price of cryptocurrencies usually has a positive effect on the profitability of mining. The closer the next halving, the stronger the hopes of the holders. Although it is not known until today, it is a coincidence or a pattern, but the main pampas of cryptocurrency just accounted for the period after the halving. Recall that in 2020 the reward for the extracted bitcoin block will be reduced from 12.5 BTC to 6.25 BTC.
- Ban mining in China . As mentioned earlier, most of the mining facilities are located in China, despite the fact that trade in cryptocurrency in the country is prohibited. Back in early 2018, the Chinese authorities expressed their concern that the activities of miners pollute the environment and contradict tax laws. The ban may be imposed in accordance with the instructions of the National Development and Reform Commission (NDRC) of the Chinese government. The draft law is still under discussion, but has already managed to cause a considerable resonance. On the one hand, the introduction of the ban will open new opportunities for miners from other countries – India, Iceland and other countries with cheap electricity will be able to take advantage of the situation and take a leading position in mining. At the same time, on the other hand, the withdrawal from the market of a larger share of capacity may adversely affect the complexity of the Bitcoin network and, therefore, the cryptocurrency rate. The complexity of the network will decrease, and after it the course of Bitcoin. So far this is only a guess, so you need to independently monitor market news and the complexity of mining in 2019.
Despite such a challenging year 2018, mining in 2019 continues to be relevant. New miner models appear on the market, investors' opportunities are expanding thanks to companies offering cloud mining , due to which mining cryptocurrency covers all levels of contributors and continues to evolve.
In addition, each investor must understand that investment is always a risk. The cryptocurrency industry continues to be an unpredictable industry, but at the same time very profitable.
Publication date 25.06.2019
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