Despite price challenges and a surge in regulations around Bitcoin mining, the BTC hash rate is making new records every week. In January 2022, the mean hash rate breached the level of 183 Exahash, which is the highest level on record. The BTC network witnessed a sooner-than-expected recovery in the mining sector after China announced a crackdown on the mining of digital assets in the region.
Overall, the hash rate plummeted as much as 54% in May 2021. However, leading Bitcoin mining companies shifted to other global locations due to the mining-friendly approach by the relevant governments and cheap electricity. With mining rewards getting less amid Bitcoin halving events, rising competition and energy issues, there is one key question that comes into the mind of every individual interested in this sector, is BTC mining still profitable?
Well, analysts believe it is, and they have some strong numbers to back their claims. According to Paolo Ardoino, the CTO of Bitfinex, large institutions will take more interest in Bitcoin mining in the coming months. "I expect the bitcoin hash rate to continue to rise as competition in the bitcoin mining space increases. In fact, bitcoin mining is demonstrating a strong degree of anti-fragility. Notably, the China ban in the summer of 2021 demonstrated the resilience of the sector. Businesses will continue to be attracted to the space, and this in itself is a testament to the profitability of the space as a whole,” Ardoino said.
Cost of Electricity
According to Maria Stankevich, the Chief Business Development Officer at EXMO UK, the cost of energy plays an important role in the profitability of Bitcoin mining and the reason behind leading mining players moving to locations like the US and Europe is that the price of electricity for mining is very low in the mentioned regions.
“Bitcoin mining is still profitable in 2022. If we are going into the details, then let's look at the different aspects of mining that we should take into consideration when we talk about its profitability. Cost of electricity, the electricity prices are very different from country to country. Russia, for example, has very low prices for electricity compared to some areas (like Siberia), so it charges a lower price for industrial electricity in order to encourage economic growth. This means that a mining farm in Siberia will pay 50% as much for the electricity you would mine at home in Germany or the USA,” Maria said.
“Secondly, the mining hardware. There are plenty of different mining machines today, but according to different studies, the majority of the most modern machines could remain profitable at a bitcoin price between $5000 and $6000. Thirdly, reliable mining pool and fees while selling BTC. Today, there are a few very big mining pools that provide certain security to the miners. Sometimes, they have referral partnerships with some exchanges that lower commissions. But, even without this mechanism, fees on the exchanges [have] dropped significantly over the past few years, so from this point of view mining also looks profitable,” she added.
Current Bitcoin Mining Ecosystem
Ilman Shazhaev, the Executive Chairman of OneBoost, believes that the current dynamics of the crypto market facilitate Bitcoin mining, even at a low BTC price.
“As for BTC mining profitability, I can confidently say that it is still profitable. Bitcoin mining is especially profitable because, despite the current situation with the all-time-high hash rate (around 200 exahashes) and the price fluctuations below $40,000 (which are the least favorable conditions), the top-end devices are so energy-efficient that just around 40% of the mined Bitcoin covers the company’s expenditure, the rest is pure profit. If you compare it with a similar situation in 2018 and 2019, the expenditure back then constituted 70–80 percent with 14 nm chips,” Shazhaev noted.
“So, without a shadow of a doubt, Bitcoin mining is profitable at the moment, and despite all the price swings during 2021, analytical reports from our data centers alone show the average statistics of an 80% profitability rate. Respectively, even taking into account all the complications for mining due to the low price and the high Bitcoin mining difficulty, mining of the first cryptocurrency clearly remains profitable,” the Executive Chairman of OneBoost, highlighted.
Recovery
The BTC mining sector has recovered quickly from the recent setbacks like China’s ban, Russia’s crypto rumors, Kazakhstan’s shutdown, and energy consumption-related problems. Farah Mourad, the Senior Market Analyst at XTB MENA, outlined that the recovery indicates strong Bitcoin mining fundamentals.
“Since its crash back in June, Bitcoin mining difficulty indicator recovered from China’s crackdowns effect reaching a new all-time high. Since then, the markets expected the mining hash rate to remain in an uptrend, until the potential Russian crackdown on bitcoin mining. Would this change the expectations? It is important to note that a potential Russian crackdown on bitcoin mining would result in a lower hash rate, which doesn’t necessarily mean more profit for miners,” Farah said.
“The direct effect would be seen over bitcoin value and revenue. As we’ve seen post-China crackdown, miners managed to recover fast. Any potential profit for individual mining might be short-lived with the challenge of having access to extremely low-cost electricity. We continue to see a significant accumulation trend since 2021. Putin backing crypto mining might be supporting the trend for the short term as well. A potential migration is still on the table which would lead to changes in trends. Mining spreading over different jurisdictions might potentially bring more stability to hash rates,” she added.
