After Stellar Year, Bitcoin Mining Profitability Starts Falling : Research

 

The end of the 2021′s crypto-mining gold rush may have just started

The profitability of mining bitcoin has been slipping since November after a very profitable few months, Arcane Research said Wednesday in its monthly report.

• In the month following China’s crackdown on miners in May, the hash rate – a measure of computing power on the network – almost halved, data from mining pool BTC.com shows. With less competition from Chinese miners and soaring bitcoin prices, the remaining miners saw returns steadily grow until November, Arcane’s data show.
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• But between Nov. 9 and Dec. 22, cash flows from bitcoin mining using Bitmain’s Antminer S19 have decreased by 36%, Jaran Mellerud, a researcher at Norway-based Arcane, told CoinDesk. For the S9 they’ve dropped 50%, he said. Mellerud attributed the slide to “a 28% drop in the bitcoin price over the same period, coupled with a 12% increase in [mining] difficulty.”
• The profitability of mining using S19s has fallen to levels last seen in July, according to Arcane’s data.
• Mining dificulty has been increasing since the end of July, data from bitcoin explorer blockchain.com show, as displaced Chinese miners found new locations for their operations and new investments came online, particularly in North America.
• The difficulty of mining a bitcoin block automatically gets adjusted based on the hash rate to keep the time necessary to mine a block stable.
• The biggest publicly traded miners have extremely many ASICs [application-specific integrated circuits] scheduled for delivery in 2022. Given these deliveries and the fact that Chinese miners are still plugging back in, the hash rate will likely continue to increase into next year, said miners .  
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• That means the “super profits” that we saw in 2021 may continue to fall in the first few months of 2022.
• Some of the world’s biggest mining firms echoedthe same prediction over the past few weeks. Most expect the hash rate to grow significantly and even double by the next year as more machines are deployed, such that the difficulty of mining will rise, and profit margins will narrow down.
• But profitability, will ultimately depend on the price of bitcoin. If it “increases faster than all the new hash rate coming online in 2022, we might see periods in 2022 with similar super-profits as in 2021.