Bitcoin Mining Faces Challenges: Is It Still Worthy？

BTC network difficulty reached its highest level on record last week.

Bitcoin mining revenues have decreased by nearly 50% since October 2021.

Bitcoin has a total supply cap of 21 million. The circulating supply of the world‘s largest crypto asset crossed 19 million BTC recently, which means that only 2 million coins are left to be mined in the next 100 years. A major battle is going through Bitcoin’s scarcity and its mining rewards.

So, with growing challenges, an important question emerges, is it still profitable to mine Bitcoin？ Yes, it is, but the volume of profit has been declining sharply over the last few months. In the next few years, it will be extremely difficult for small Bitcoin miners to remain profitable. However, large mining companies will remain in the game for the next few decades.

Finance Magnates had the opportunity to interview some of the leading names in the crypto ecosystem to have their views on rising difficulties in the Bitcoin mining sector. According to them, global electricity prices and technology-driven solutions will shape the future of BTC mining.

“It‘s no spoiler alert that as the network’s mining difficulty (also known as the hash rate) rises, mining transaction goes down. Let‘s talk numbers: many resources show that the collective earnings on the Bitcoin network are around $40 million a day, decreased from the average of $60 million we’ve witnessed at the end of last year, a result of the hash rate uptrend,” Farah Mourad, Senior Market Analyst at XTB MENA, said.

Impact of Bitcoins Price

According to Farah, the recent downtrend in the price of Bitcoin is also hurting the operating margins and crypto holdings of miners. Since reaching an all-time high of $68,000 in November, Bitcoin has lost nearly 40% of its value.

“The price plays a significant role for miners and seeing a recovery in ”the king of crypto“ that would push it back to its 2021 highs would have a major positive impact on profitability. For those mining Bitcoin at home, we dont believe it will ever be as profitable. But the crypto world is expanding and other projects on the rise could be a better alternative for home miners,” she explained.

Hash Rate Recovery

Last year, China imposed a ban on crypto mining activities, and BTCs hash rate dipped by more than 50% within a few weeks. The mining rate recovered quickly after the relocation of large mining companies and reached an all-time high of over 214 EH/s in 2022. Currently, the mining rate is hovering near 200 EH/s.

Marc P. Bernegger, Co-Founder of the Crypto Fund AltAlpha Digital, believes that innovation in Bitcoin mining will boost the sector in the coming years.

“It's fascinating to see how quickly the crypto mining industry adapts to changes like the mining ban in China or ESG requirements. In my opinion, the crypto mining industry is very innovative and fast-moving and still the foundation of the whole crypto economy. Personally, I like to see how emerging mining locations like Paraguay are evolving in this very competitive market.”

Still Profitable

Many global mining companies are still trying to find locations with lower electricity prices to keep up with rising profit levels. Despite a drop in block rewards, miners have found different ways to remain in profit.

“For mining, the lower the electricity price, the higher the profits; generally, the electricity price ranges between 26% and 30% of the value of miners rewards. The profitability peaked around 2021 for miners and has since dropped by about 40%, however in 2021 profits were outstandingly high,” Johnny McCamley, Founder and CEO of CryptoClear, said.

Commenting on the YoY mining revenues, McCamley said: “In 2021, the miners‘ earnings decreased to 0.0006 per day however due to the increasing price of BTC coin, this averaged out at $30 a day. In 2022, we are looking at 0.0004 BTC for miners per day. That’s around $16 per day based on a BTC price of $40k. We hope the profitability of mining will continue for years to come.”