Is Bitcoin Mining Still Profitable Today?

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Is bitcoin mining profitable in 2020

Is Bitcoin Mining Still Profitable Today?

Mining is one of two ways to own Bitcoin, with the other being buying from an exchange or via peer-to-peer platforms such as Paxful.

Mining has one clear advantage, however. Once the infrastructure is set, mining lasts for as long as the infrastructure does or the miner wants. Whereas, buying, one requires constant capital to grow the portfolio.

However, in recent years, setting up a mining rig has become quite expensive and out of reach for many retail investors.

When Bitcoin was in its infancy, roughly five years ago, mining was a no brainer, especially because one could use home devices to mine Bitcoin.

The Bitcoin miners working away at mining BTC

Bitcoin Mining

To create Bitcoin (mining) and secure transactions is symbiotic. As computers are used around the world to verify Bitcoin transactions, new Bitcoin is created.

To mine one requires computing power and electricity. Mathematical algorithms have to be completed on the Bitcoin blockchain to produce new Bitcoin.

The difficulty of these algorithms is regularly adjusted. On top of this, every four years, the reward for mining is cut in half. The most recent halving saw the reward fall from 12.5 BTC to 6.25 BTC. Currently, there is 6.25 Bitcoin created roughly every ten minutes.

In the early days, miners who had the vision to hold at the time were greatly rewarded as prices began to pick up in 2017 and even more in 2020 and 2021.

Beginning 2017, difficulty adjustments began reaching record highs and turning profits in a mining operation was hanging at a balance. In fact, some mining rigs have since been wiped out. Most of those that survived the 2020 halving are big operations that have cost investors millions.

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At the time, the average cost of mining Bitcoin was $7,000 but the digital asset was setting lows of $6,000. This meant that miners were losing money if they mined and sold instantly. 

Setting Up A Mining Rig – ASICs, Electricity and Other Considerations

Individual miners have to join a pool, so as to collectively mine and be in with a chance of earning BTC. This is then be shared with all miners getting a fair share determined by the amount of power surrendered.

F2Pool, Poolin, BTC.com (which was recently acquired from Bitmain by 500.com), Antpool and ViaBTC are the biggest and best mining pools.

A miner needs to invest thousands of dollars in graphics processing units (GPUs) or ASICs to keep up with the computing power required. Bitmain, MicroBT, Ebang and Canaan Creative are among the most popular ASIC manufacturers. 

bitcoin mining profitable

Energy Costs Play A Significant Role In Mining Profitability

To run these mining rigs, one also requires a lot of electricity. In fact, for most miners, the cost of electricity has been the difference between profit and loss.

The high cost of energy has led many individuals and entities to set up operations in jurisdictions that have low energy costs and power subsidies.

One of these is the small Nordic island nation of Iceland. The country offers some of the cheapest electricity in the world due to an abundance of geothermal power.

In addition, it’s also one of the countries that has the lowest temperatures, reducing the cost of cooling the mining rigs. Other jurisdictions that are a miner’s paradise include Canada, Georgia, Russia, Finland and Latvia.

Using an average electricity price per kilowatt-hour and the energy demands of the Bitcoin network, miners can determine how much they stand to make. 

Bitcoin marketplace Paxful

Is Cloud Mining Best?

Buying computers and computer power is a one-off cost and that can be recovered after a couple of months of mining. However, electricity is a recurring cost, and one that miners need to understand before getting into the business.

According to some studies, mining Bitcoin requires more electricity than in some countries. Some of these include Argentina, the Netherlands and UAE. One solution for this has been using renewable energy. With computers having to run 24/7, there is also a need to have cooling equipment when setting up a mining rig.

A number of companies have cropped up over the years offering cloud mining solutions. These companies already have set up operating rigs but continue to expand using capital invested.

With cloud mining, instead of having to buy mining equipment and incurring electricity costs, some miners buy into these companies. Investors can pay a monthly fee or a lifetime fee. These companies have been one of the easiest, hassle-free ways to mine Bitcoin. They include Genesis Mining, IQ Mining, Hashing24 and HashShiny.

However, there has been controversy over cloud mining contracts which are said to be impossible to make a winning return die to contract stipulations.

Whatever way you choose to mine Bitcoin, do some research and see what’s best for you to make a profit.

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