On December 20th, 2022, one of the largest bitcoin mining companies, Core Scientific, filed for bankruptcy. The plunging bitcoin prices led to massive losses, rubbing the company’s market cap from $4.3 billion to just over $78 million. Other reports indicate that towards the end of 2022, bitcoin mining companies had racked up $4 billion in debt.
The reports above are a sign of big problems in bitcoin mining. That leaves investors with the question, is bitcoin mining profitable? This guide analyzes the current profitability of bitcoin mining.
Bitcoin mining: The background
Bitcoin was created in 2009, with the first block being mined that same year. When bitcoin was still unknown in its early stages, mining bitcoin seemed like a waste of time.
Satoshi Nakamoto was the sole bitcoin miner for most of bitcoin’s early years. However, soon the coin began gaining traction within the crypto ecosystem.
In the first four years of bitcoin, mining profitability in terms of BTC was reasonable. After finding blocks, the network would release 50 BTC. As such, every 10 minutes, miners would get 50 BTC.
However, bitcoin prices at the time could have been more motivating. However, those that accumulated massive amounts of the coin noticed its value a few years later when it surged and surpassed the $69k mark.
In the early years, mining bitcoin using CPUs was still a viable way of earning BTC in those early days. As such, people needed way less investments to start mining the coin.
From 2012 to 2016, the BTC earned for every block was decreased to about 25 bitcoin. The block reward was reduced to 12.5 BTC in 2016 and 6.25 BTC in 2020. So, over the years, the number of bitcoin mined per block has reduced after every halving cycle, effectively reducing the profits investors can accumulate in BTC.
How to calculate bitcoin mining profit
When considering the profitability of any venture, the following things must be considered;
- Operational costs
- Revenue earned.
Operational costs vs. Revenue
To check the profitability level of bitcoin in 2023, we will compare the profits made by some good mining rigs daily. So the basic profit function should be;
Profits= Revenue garnered (BTC mined in USD) – costs (operational and any other)
Here is a short cost-profit analysis of 3 top miners from different companies;
Antminer S19 Pro
Antminer S19 Pro, a Bitmain Technologies product, is among the most exciting bitcoin miners. This machine is both exemplary in appearance and usability.
This machine consumes 3250 W of electricity and has an average hashrate of about 110 Th/s. Electricity costs differ all over the world. However, the prices in the US in January 2023 ranged from $0.12 to over $0.47 per kWh. Other data suggests that the average electricity cost globally stands at $0.159.
Going by the statistics above, on average, the daily power costs for mining with Antminer S19 pro amount to $11.7. Further data indicate that the amount of BTC mined daily is about 0.0003525. Based on the current price, this translates into a loss of $3.37, which is about $101 monthly. The profit ratio for mining bitcoin is just about -29%.
AvalonMiner A1166 Pro
Second on our list is AvalonMiner, another top bitcoin mining solution available within the cryptocurrency industry. This product of Caanan.io has a hashrate of 81TH/s. According to reports, this miner also has a power consumption of 3400 W.
Inputting the two values into our bitcoin mining profit calculator indicates that the AvaloMiner A1166 Pro mines only 0.0002966 bitcoin daily. This machine consumes after consuming power costs of $12.2 every day. As such, like the miner mentioned above, the AvalominerA1166 Pro makes an even greater loss of $-6.11, translating to $183 per month.
The final miner to look at is WhatsMiner M30S++. This highly affordable mining rig is a product of Whatsminer. It has a hashrate of 108 TH/s and consumes just about 3410 watts of power.
Mining profit calculator | Source: Cryptocompare
According to profit calculators, this machine can generate just about 0.0003641 bitcoin daily. However, with the average costs at $12.38, the daily loss is about $4.1.
Is bitcoin mining profitable today?
At the moment, NO!
After the mathematical analysis of 3 different miners, with the help of bitcoin mining profit calculators, it is clear that mining is not profitable. You earn small amounts of bitcoin daily using a single mine. However, the operational costs are still higher than the USD value of BTC mined.
Note: The cost-profit analysis was done in February 2023, when bitcoin traded at $23.8k.
Starting in mid-2022, mining bitcoin became an unprofitable business. Owing to such unprofitability, Core Scientific, a bitcoin miner, filed for bankruptcy. Bitcoin mining companies had debts amounting to $4 billion in 2022.
Why is bitcoin unprofitable?
Rising electricity costs
Research indicates that between January 2022, and January 2023, electricity costs have increased exponentially in the United States.
For example, in Nov. 2021, in New Jersey, US, the average electricity price amounted to $0.18 per kWh. The amount increased to $0.208 per kWh in Nov. 2022. This was a massive increase in Electricity costs.
Average electricity prices | Source: Energy Information Administration
The rising costs of electricity lead to an increase in the general costs associated with mining crypto assets.
The miner congestion
As highlighted above, in the early days of bitcoin, the number of miners was deficient; hence the mining difficulty was lower, while the chances of mining were higher.
Statistics from The Verge indicate that in late 2012, the number of bitcoin miners was unknown but below 20k. This means that the bitcoin network at the time was not congested; hence miners had opportunities to make a lot of BTC.
The number of bitcoin miners in the modern world has increased vastly — the network is congested with hungry miners. The continuous halving of the bitcoin mined per block has effectively reduced the amount of BTC earned for miners.
The low value of BTC
The value of bitcoin, which is way lower than its all-time high, slightly contributes to the lack of profits in bitcoin mining. bitcoin is trading at about $23k in February 2023.
BTC charts since late 2021 | Source: Coinmarketcap
This is about a third of the coin’s all-time high hit in November 2021. As such, the severe plunges may have contributed to the lack of profitability when mining BTC.
What about initial machine buying costs?
Of course, dozens of bitcoin mining machines will be available in 2023. ASIC miners are the best-performing mining rigs in the cryptocurrency industry.
However, excellent and reliable ASIC miners from reputable companies like Bitmain could cost between $1k and $10k. These are values for machines with reasonable hash rates. This initial purchase cost is one investor must consider before investing in mining.
Can bitcoin mining be profitable again?
The global economy is facing some degree of crisis, with the costs of living and energy surging vastly and inflation following a similar direction. However, the global economy will recover in due time, causing a slight decrease in energy prices.
Furthermore, bitcoin is likely to recover in the coming months. A good recovery will mean the dollar value of bitcoin mined increases, hence increasing the profits.