A lot of people were caught by the mirage of getting rich quickly by mining Bitcoin, but it seems that everything is not worth it anymore. As you probably know, this process has some increased costs, especially in terms of electrical power, so it’s not surprising that some analysts consider that it’s no longer profitable to do it.
The costs are already overwhelming
“Bitcoin currently trades essentially at the break-even cost of mining a bitcoin,” research house Fundstrat said in a report, according to Fortune.
A Bitcoin is created when a “mine” – a node on the network that boasts very fast computers – is faster than other miners to package up the latest block of transactions and add it to the Bitcoin blockchain. Therefore, the winner receives a new Bitcoin as a reward.
Some people consider that mining Bitcoin is actually solving a mathematical problem, but this isn’t totally accurate.
But why such high prices?
When calculating the costs of mining, more factors are taken into consideration. First of all, there’s the cost of the computers using for this. As the ‘problems’ they solve get harder over time, a lot of processing power is needed, so miners need to keep updating their stations.
Secondly, there’s the energy. Mining Bitcoin uses a lot of it. Also, let’s not forget about the cooling, since rigs generate a lot of heat.
Therefore, this leads to questions about profitability. The costs weren’t a problem when the digital asset was getting close to $20,000, but at the current price of a token, a bit over $8,000, it’s definitely not worth investing, at least at a larger level.
Currently, miners are also struggling with the transaction fees they’re paying. Back in December, the average fee was around $34, while now it’s down below 50 cents.
In this situation, should we expect to see a lot of people giving up mining Bitcoin, due to profitability reasons? Basically, it depends on energy costs and the region where this is done since other countries have way cheaper energy than others.