Is it possible to call the current moment a profitable market for the production of the first cryptocurrency and how will the profitability of mining change in the near future?
Bitcoin mining difficulty dropped to its lowest level since January 2020 at 13.67 trillion hashes (T) this past Sunday. The decline has been 45% since mid-May, when the record 25.05 T was set.
The decrease in complexity is due to the migration of miners from China. By now, about 90% of local mining companies have ceased operations. This is due to the ban on mining cryptocurrency in the country. Four Chinese provinces banned mining in June, and Anhui joined them in July.
What will happen next
By now, almost all equipment in China has already been turned off, at the beginning of July the 7-day average hash rate of the network dropped to 85 EH / s, the last time the network was at this level about a year ago – after the halving of 2020. However, a further decrease in the network hashrate and complexity due to the "Chinese factor" should not be expected, Vadim Krutov, executive director of Bitfury Group, is sure.
He named three factors due to which only a stable growth of the hash rate and network complexity will be observed:
- Customers outside of China continue to receive and network prepaid equipment;
- Equipment that was intended for Chinese customers is now being resold at discounted prices, and for many customers from the USA, Canada, Kazakhstan, Russia and other countries who did not have time to buy equipment earlier due to shortages, this is a good opportunity to realize the forcedly deferred demand;
- Equipment previously hosted in China is being actively moved by owners to other regions and restarted after a forced downtime.
How has the profitability of mining changed?
After the network complexity fell, mining became about 50% more profitable in terms of profitability in BTC, said Roman Nekrasov, co-founder of the ENCRY Foundation. He warned that few can afford to calculate the profitability in bitcoins, since the costs of the main operating costs – rent, maintenance, purchase of equipment and electricity – are mostly in fiat currencies.
“Now the profitability of bitcoin mining, even despite the drop in network complexity, is much inferior to the indicators of February-March 2021. Then the complexity was higher, but the rate of the cryptocurrency was at its peak, "- explained Nekrasov.
The current moment may be successful for those miners who already have equipment, but which for some reason were not involved and was idle, to enter the mining, suggested the co-founder of the ENCRY Foundation. According to him, for complete beginners, launching a mining farm is fraught with significant costs, which may not pay off for a long time in an unstable market.
You can always start mining, the main thing is to control the main constant factors: the cost of equipment, the cost of electricity, the complexity of the network, added Dmitry Shuvaev, Development Director of BitCluster. He emphasized that now, taking into account the reduced complexity of the network and the cost of equipment, its payback period is approximately 9-10 months. Shuvaev called the placement of equipment for hosting as the main issue at the moment, since demand outstrips supply.
The rate of decline in network complexity has already slowed down, and we are likely to face another insignificant drop in two weeks, perhaps even in a month, Nekrasov suggested. By the fall, he expects new growth in network complexity as Chinese miners relocate and expand existing ones outside of China.
Shuvaev also warned about a possible slight decrease in complexity. He does not think that the figure can be cut in half from the current levels.
Krutov noted that the transfer of 2.5 GW equipment is a long and capital-intensive process, which will be completed only in the first quarter of 2022. At this time, the network will return to a state of normal profitability.