Bitcoin mining, profitability and difficulties

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Despite record revenues, bitcoin mining would only be profitable for big players.

bitcoin mining

A new study published by the company Diar reveals that if the price of Bitcoin remains 40% higher than it was a year ago, hence companies of bitcoin mining have generated record revenues this year: 4.7 billions of dollars. But this activity would no longer show profitability for small players of this market.

Bitcoin mining: only big ones manage to generate profits

Small mining operations are struggling to resist major players in the industry. This is the conclusion of a study published by the research company Diar. According to them, only the big mining pools – in particular, those owned by the Chinese juggler Bitmain – would manage to pull out of the game.

Since the beginning of the year, the profits of bitcoin mining companies who have to pay the same price as consumers for their electricity have slowly eroded, and are now zero.

Bitcoin mining and electricity cost

To explain the difficulties faced by small players in the industry, Diar points to a number of factors such as a decrease in rewards and increased competition (with a hash rate that has blazed on the Bitcoin network).

Increased bitcoin mining rate in 2018

It states that rents, salaries, equipment, and other indirect costs are likely to jeopardize small-scale mining, which can not rely on economies of scale.

At the same time, the mining pools posted a record turnover. Indeed with the equivalent of $ 4.7 billion generated during the first nine months of the year.

Bitcoin mining record turnover in 2018

According to Diar, China remains one of the few countries to offer electricity prices that would make a Bitcoin mining activity viable. Indeed with an average cost of $ 0.08 per kilowatt hour. This would lead to a situation that favored large mining pools, such as BTC.com and Antpool. Both are owned by the giant Bitmain, and they remain profitable.

The stranglehold of Bitmain on the market

If Bitmain still manages to generate profits by bitcoin mining, the company, which also holds a stake in ViaBTC, put first on the sale of mining equipment – as it has done for several years. And for good reason, since it has drawn from this activity 95% of its turnover in the first half of 2018.

The company claims to get 75% of this market. It would therefore seek, according to Diar, to ensure that the network remains profitable for all miners. And even for its foreign customers, who have to cope with higher electricity costs than China. Moreover, they count for more than half (51.8%) of their equipment sales.

The Asian firm currently manages 11 farms in its country of origin. They intend to open early 2019 establishments in the states of Tennessee, Texas, and Washington.

Bitcoin mining forecast

Diar evokes, in particular, the recent and moderate reduction of the mining rate in force on the Bitcoin network. They conclude his study by declaring that the mining would henceforth be “reserved for big actors”.

“It is unlikely that the recent decline in mining power will continue. While large mining operations, which run on cheap electricity, generate a gross margin between 50 and 60%. The market still has great upside potential, although profits are likely to decline.

In any case, Bitcoin mining is, for the moment, and probably in the future, reserved for large players endowed with considerable financial means.