Topic: [2022-06-17] Bitcoin mining becomes unprofitable as BTC price falls (Read 688 times)

As of sept 2022 i still had some of my 1080ti hybrid cards mining eth.

they paid for themselves maybe four fold.

IE. 4x700=2800 in dec 2017 made over 8000 with them.

I pulled the rig and turned on an old l3+

I have many old idle pieces of gear i hold them and fire them up when the bull runs.

But now with the looming mega crash not sure what i will do next.

Because 13 million is peanuts, the daily reward is $19 million each day, liquid cool bitcoin miners can increase their efficiency to really crazy levels,

https://youtu.be/8QZAGpssUe0
Stock s19 pro hydro being pushed from 27w/th at 23w/th, one machine gets 45th extra and even at these prices that means $1000 a year per machine, a full ant box will get you 210 000 extra a year, that's raw profit on top of your operation, you need just 13k of those to break even for such an investment.
Plus with that, you can make almost obsolete gear profitable again, and squees out competitors.

Even though that's the case with some of the miners, I don't think the same can be said with most manufacturers, and on top of that, if they can capitalize on the situation to come up with a really efficient chip at a reasonable or rather better price compared to their competition, then they can create a great gap between them and the rest ^{[even as a newcomer and that surely leads to significant profits]}.

According to the Block cryptonews website, revenue for bitcoin miners fell down by 16.2% for the month September based on monthly revenue from August. It has also been falling for 5 months this year since November 2021 since Block Research began compiling mining revenue data.

However, there is also another news that reports that a cryptomining hardware maker has raised $13 million in seed funding to create liquid cooled bitcoin miners. Do the venture capitalists that invested in this company speculate that we might be on the bottom of this bear market? Why risk $13 million in an industry with declining revenues?



Bitcoin mining revenue fell 16.2% in September to about $550.5 million, marking its fifth decline in the last six months and the lowest total since November 2020, according to data compiled by The Block Research.

Source https://www.theblock.co/post/174445/bitcoin-mining-revenues-down-16-2-in-september



Crypto hardware technology startup Fabric Systems has raised $13 million in seed equity funding, with the capital to be used to build two products – a liquid-cooled bitcoin miner and a computer processor for advanced cryptographic algorithms such as zero-knowledge proofs.

“Most of the funding is going to be used on the Bitcoin side,” Fabric co-founder Michael Gao told CoinDesk. “Some of the funding will be used for pilot experiments in the zero-knowledge-proof side.”

Source https://www.coindesk.com/business/2022/10/13/crypto-startup-fabric-systems-raises-13m-seed-round-to-provide-blockchain-hardware/

You are correct, there are some Ethereum miners who made their ROI and also some profit, however, the argument is the same. The Ethereum miners cannot easily shutdown then take the risk of competing against the miners of Bitcoin. We are also assuming that the switch for Ethereum miners is as easy as selling the hardware they presently have then go to a store and buy miners for Bitcoin. There is a waiting list. Also, who will buy their Ethereum mining hardware?

There is also the next halving which implies that there will be more competition for fewer coins.

If you bought when cards were at their highest with less then 6 months left on mining then you got what you deserved. Sorry, but you can't fix stupid.

Last spring (2021), I bought a couple of 2080Ti, mined with them for a YEAR and sold them this spring (2022) for close to 2x what I paid. There is no way the person who bought them could ever come close to making money.

I just about broke even mining in the year I had them and had I kept them would have been a few hundred dollars ahead when mining ended. So, it was definitely possible.

-Dave

If! And for a lot, it's not the case.
So, if we go to Reddit for example you will see that hundreds have bought gear at scalper prices during the spring and those guys will never ever achieve ROI, and there are hundreds and thousands of them, one year ago the hash rate was 700TH/s it peaked at 1Peta, with one 3090 doing around 120Mh/s you still have 2 and a half million that for sure haven't reached the break-even point.
Add to the price the risers, the power supplies, extra fans, a frame, that and that, downtime, cleaning, it adds and adds


A 3090 with free electricity will give you 50 cents worth of coins a day, if you want to go long on shitcoins you are far better just selling the damn thing and buying with the money those coins you feel are going up, with an older GPU like a 2080 you get 20 cents, in a year you will lose more on depreciation for the card that what it mines.

GPU miners are done for, and the ones that will rush into Bitcoin mining just because they are addicted to the game and want to make a steady income just by looking all day at fan spinning are in for a disappointment and some serious losses.

What loss? If they bought the ASICs / GPUs long enough ago they are paid for many times over. Even if you bought only a year before the merge if you had cheap enough power you were under 300 days for RoI on most ASICs and about the same for GPUs.
GPUs can and are still being sold off,  and as of now it looks to be more profitable running current or 1 gen out SHA ASICs then GPUs.

As for the other coins that can be mined with the ETH ASICs, it's a tough call. If you RoI already on them whatever you sell them off for is profit. Or, you can keep mining at a loss at the moment and hope those coins go up enough.

Businesses for the most part, if they know they can make money mining BTC but *may* make money mining something else but *will* make money selling the ASICs are going to sell the ASICs and mine BTC. That's just good business.

-Dave

You're right, but I intentionally didn't include them because I wasn't sure if there was an easy way for them to sell and recoup some of the initial costs to fund their next mining operations.

You have a point that it's "less risky to mine other coins", but I read a few articles yesterday that mentioned it's no longer that profitable ^{[e.g. this and this]}.

@DaveF. However, will those miners of Ethereum shutdown easily and accept the loss? They can continue to mine other coins like Ethereum Classic and the Ethereum proof of work chain which is also presently being supported by exchanges. Binance has funded a new mining pool for ETHW to continue support for the miners.

@SFR10. I disagree, Ethereum miners might not take the risk of selling their hardware to buy Bitcoin miners and compete with Bitcoin miners. It would be less risky to mine other coins.

Actually I think there is a good portion of the hashrate out there now from places that were power limited and now that GPU mining is more or less dead they are running SHA (and other) ASICs and remember there were also a lot of ETH ASICs out there too that are now shut down freeing even more power for SHA.

I don't think people realize how many places have plenty of space and cooling but not enough power to fill the building and run wall to wall miners. But, they filled the building with miners and then did some math to figure out what to mine when and what to keep powered off.

-Dave

In addition to @bbc.reporter's comment, there's an indirect link in the above article that points to a "tweet" that claims most of the new hash rates are coming from Bitmain's Antminer S19 XP, but I have a feeling that it could also be in connection to a select few companies that were supposed to receive the intel's second-gen mining chips in Q3 of 2022.

• Quote from: bbc.reporter on October 10, 2022, 10:45:17 PM
  How can Ethereum miners move and mine Bitcoin? The mining algorithms are not the same!
  
  Perhaps @dansus021 was referring to those GPU miners that recently sold their rigs or rather GPUs and replaced them with SHA-256 ASIC miners ^{[personally, I think they might be responsible for only a small percentage of what we're seeing at the moment]}.
  

@dansus021. You have heard wrong or you are inventing stories. How can Ethereum miners move and mine Bitcoin? The mining algorithms are not the same!

In any case, if the hashrate is increasing, then it appears that miners think that the market will pump or there might be some large mining farms that found cheaper sources of electricity. It might also be what I have been speculating. Illegal mining hehehe.

but i hear the news that bitcoin hash rate keep to touching new ATH day by day you can see the news here
https://cointelegraph.com/news/not-a-minor-adjustment-bitcoin-mining-difficulty-soars-13-5-to-new-ath

it seems the miner from eth move to bitcoin

It might not only because of mismanagement if it has occured. It is really showing that the cryptospace economy is also going through a recession. Much of the miners' earnings also depend on the speculation that the prices of proof of work coins in the market are going up.

In any case, if they were already in debt when they requested more mining equipment, I reckon this is not only mismanagement, this might also be their way of speculating that the bull market will return and bitcoin would begin pumping. It was a risky business decision that did not go according to what they might have predicted.

It's not that desperate
https://fortune.com/2022/08/16/bitcoin-mining-crypto-winter-stronghold-digital-selling-electricity/

Since it's paywalled:

There is one difference, you can earn money with the price being stable or even while it's going down with mining while holding coins, of course, you don't.

This perfectly shows how mismanagement of funds could have a negative impact on a certain company! CMIIW, but from what I understood, they were already in debt at the time they requested more mining rigs and that's a huge gamble on something that doesn't even have a static outcome ^[SMH]!
^{- FWIW, I equally blame the lender as well.}

News update.

This bitcoin mining company made a decision to return mining equipment to settle a debt. It appears that there will either be bitcoin miners that does not want to get a loan to maintain their monthly cashflow or no lender is willing to provide loans for bitcoin miners because they are at higher risk of being unprofitable during a bear market.



Bitcoin mining can bring some promises of good fortune, but given the unpredictable nature of bitcoin and other cryptocurrencies, the activity can go sideways and force even the most well-funded company to resort to desperate measures – like selling equipment to stay afloat.

Stronghold Digital Mining announced on Wednesday that it will return over 26,000 bitcoin mining machines to New York Digital Investment Group in exchange for the cancellation of $67.4 million in debt.

Source https://bitcoinist.com/bitcoin-mining-firm-returns-26000-rigs-to-survive/

I understand your argument. A falling price and a high hashrate would certainly make it cheaper to buy bitcoin than start mining them if you are not a miner. However, my argument is for those miners that already have their farms and their problem on their monthly cashflow to maintain the business operation. It would be head shaking if mining farm owners get a loan to buy bitcoin then leave the business.

That is of course correct that mining profitability depends on Bitcoin's price, but what is even more interesting right now are the rising energy prices all around the world due to issues from the war. Who knows, maybe we will see another major shift in geolocations for mining operations but this time not because of national bans, but because of countries who have the resources to provide cheap energy while at the same time having a need to circumvent sanctions. Russia wasn't the Bitcoin friendliest country in the past, but could that change? Ideas?

On another note Bitcoin's volatility is the reason why we have seen further and further consolidation in the mining industry from many participants to a few major players. They have set up the whole business with the volatility in mind. They had the cash to survive price swings while others had not. But still I think that the biggest advantage usually are the energy price and stability in the respective geolocation of mining businesses. Now that electricity costs are going through the roof in some places, I wonder whether some mining businesses must go out of businesses because they are confronted with problems from two sides: dropping Bitcoin price and rising energy costs. Any business who is in a place where there is just one of those problems to be dealt with automatically has an advantage. We will see in the coming autumn/winter I think.

I still find it's not that different. After all, the mining revenue heavily depends on Bitcoin price. I fail to see there's assurance mining always profitable.

@ETFbitcoin. It is very different hehe. A loan to pay for costs of operation for bitcoin mining, where there's an assurance of monthly mining revenue is different from taking a loan only to speculate on bitcoin's price and hope it will pump. The miner has a real business, the speculator has nothing but expectations.

I reckon that miners should find a new type of lender. Tether, iFinex, Tether should be very perfect for this kind of situation hehe. I am not sure what would be the business arrangement, however, everyone knows Tether accepts commercial papers for short term loans. This would be very useful for miners if their problem is monthly cashflow. They can leverage 1 month of expenses and repay this then reborrow repeatedly until the market and difficulty are stable.

@ETFbitcoin. It would kill their business. How will the miners repay the loan?

When it comes to traditional business and banks, yeah, that's the rule.
Unfortunately for me as I don't have those advantages, and fortunately for bitcoin's security when it comes to this business you can get a lot of investors that would throw money at you without a real plan on the paper, not even mentioning a fully running business with yearly contracts with a stash of coins set aside, they will get the money, and once you secured a bit, taking into account that the gear is already paid, the only expenses are electricity and rent you can keep it one for a while mining at a tiny loss. Not even mentioning the outrageous cheap rates some of these big guys have for power.


As I said above, from banks they will get the same answer as shale oil a few years ago, no cash for you!
For the bear market thing, well, bitcoin going back to 30k and even 40k won't be that much of a relief for miners, a lot of hashrate is already ordered so if the price goes up it will get plugged in rising difficulty diminishing revenue, for let's say good times, not extraordinary good like back last year in April, we would need around 60k at same difficulty.
24 cents instead of 8 per TH/s, an s19 making 24$ a day, burning 8$ at 10cents/kwh, ROI in a year and something, all numbers rounded up to make it easier.

It might...

That's the problem. You can't run a business based on speculation. IRL, you can't go to the bank to borrow money while saying to the banker "my business idea will maybe work" They want something sure and are well trained to evaluate the risks.
Even if the client has collateral, they consider it as a +1 point, but that doesn't make it bulletproof

Now considering the mining industry, things aren't smelling the sun currently. Most are pessimists about the market (including me). I don't want to say it will never come back on track, but it's not coming anytime time soon. Surely not during 2022, hence hesitations.

The good news is the crypto market isn't the only one to go down. Apple, Facebook, and Gold etc are in the same shoes

while whales are still here...sent more than 50,000 BTC to crypto exchanges on 20 and 21 June 2022
exodus!

@stompix. Also, if mining is really unprofitable for the biggest miners, they can get a loan in fiat against their bitcoins, mining hardware and other assets to use for their cashflow and business expenses while waiting for the market to improve again. This bear market might be overestimated and in reality it might end sooner than speculated.

Nice, article, very informative.
Now I know another analytics platform I can safely ignore for their research!
So their data is a graph of bitcoin price and some... made-up stuff.
Everyone was shooting that the average for keeping mining profitable is 30k, we're down one thrid and look t the difficulty, a -1.5% budge down.

Every single of those idiots goes to google, grabs the average kwh price per country, grabs the hashing rate distribution from digiconomsit and they have a graph.
My average electricity cost for residential is 30 cents, I mine for 5 cents, and my gear has been paid off, so what's my actual cost of mining?
There are tons of miners mining at 2cents, tons who have already made ROI so for them is electricity vs income, nobody even bothers to listen to those, not even talking about going deeper, guys that can claim write-offs on taxes based on depreciation on their miners.


That could have been a nice graph but they had to go log, which when it comes to hashrate is just stupid, it makes the hashrate look almost flat when there are billion in equipment added in a year, worth more than everything that was previously mining in 10 times.

Anyhow, this is what matters:
https://bitinfocharts.com/comparison/bitcoin-mining_profitability.html#3m
We're not yet to the lowest in the last 3 years so probably there won't be any major drop unless we go again below 18k, which I doubt for at least some time.

Yeah but remember that the hashrate only actually drops if miners completely stop mining in the first place, but that would be catastrophic to their own profits.

You're unfortunately correct when it comes to thieves, but the same can't be said for the latter... To harness such energy, miners need to acquire certain pieces of equipment for their setup and they tend to cost a lot ^{[at first]}.

Regarding the difficulty adjustments that it happens roughly every two weeks, you have a point but that doesn't change the fact that miners are currently earning less when they try to convert their BTCitcoins into dollars.

As of now the next difficulty adjustment in about 5 days puts it at flat. So it does not look like any miners are shutting down. Or if some are shutting down as fast as they do others come online. If BTC stays at it's current price point or drops then we will have to see what happens in 20 days or so from now to the difficulty. At a guess a few of the edge cases might shut down smaller farms but for the most part since you have to buy & pay for the gear before you get it, it's better to mine at a loss and accumulate coins hoping for an increase in price then shutting it down and selling off the miners.

Just my view.

-Dave

You know.... Satoshi has built in mechanisms into the Bitcoin protocol to combat situations like this. It just happens that when the hashrate drop, the Bitcoin protocol will adjust the difficulty so that it will become easier to mine bitcoins. In affect, miners will then use less electricity to mine coins and it will stay profitable under conditions when there are lower prices.

https://stats.buybitcoinworldwide.com/hashrate-vs-price/  <=== I do not see a dramatic drop in the hashrate at the moment, so I guess a lot of miners are still mining with enough profit. Study the graph and you will see that the hashrate has climbed ..even when there was a big drop in the price. 

Unprofitable for who? For people who pay for their electricity? Might be true. However there are many people who get their electricity for free somehow. (thieves? solar energy?) In the end some miners may shut down them rigs but the network will never go off. There will always be somebody somewhere mining bitcoin. Heck, some people will probably mine it whether it is profitable or not just because they can.

A year ago as a result of China’s crackdown on cryptocurrency mining facilities, Bitcoin (BTC) mining became easier and more profitable. More than half of the hashrate, or the processing power of the Bitcoin network, dropped since the market peak in May 2021 as a result of the Chinese government’s mining restriction.

In spite of this, mining Bitcoin is no longer profitable for miners, according to data from the cryptocurrency analytics platform CryptoRank that was published on June 17.

This is because of the meltdown that has occurred in the cryptocurrency market, which has caused Bitcoin’s price to drop to a level that has not been seen in the past 18 months and has led the flagship digital asset to struggle to maintain support above the critical $20,000 level.

Source: https://finbold.com/bitcoin-mining-becomes-unprofitable-as-btc-price-falls-to-the-average-cost-of-mining/