Bitcoin miners have around $4.7 billion in revenue in 2018 — but because of the cost of electricity, miners are failing to make a profit.
TheNextWeb, citing blockchain research firm Diar, reported that based on the data, this marks the first time cryptocurrency mining businesses aren’t making money off their bitcoin mining efforts. According to the report, as it stands, bitcoin miners make 54,000 BTC each month for processing the mining blocks. The miners, noted TheNextWeb, also make money via users’ transaction fees. The high hash rate and increased adoption have resulted in mining revenue blowing past $1.7 billion last year — but if a miner is making a profit at all, it's very small.
To deal with the situation, Diar predicted Bitmain, the largest bitcoin miner, will have to “swing” the hashrate for bitcoin mining between countries to deal with electricity costs and make a decent profit from all of its locations, noted the report. The strategy is expected to increase when Bitmain opens three mining farms in the U.S. during the beginning months of next year. The move implies that mining for bitcoin is becoming largely the domain of the big players.
Diar isn’t the only one highlighting the lack of profitability with bitcoin mining. In February Morgan Stanley analysts estimated that bitcoin miners lose money when the price of the once high-flying digital currency is below $8,600. The break-even point may even be a bit generous, as analyst Charlie Chan and his research team assume a cost of electricity that comes in at just a few pennies per kilowatt hour.
The Morgan Stanley team believes “the bitcoin mining hardware demand and price will decline further.” A dip in demand for the nuts and bolts of crypto mining would have, and seems to be having, an impact on none other than Taiwan Semiconductor Manufacturing Company, which makes chips that are, among other things, used in cryptocurrency mining, which relies on powerful computers to produce bitcoin. The company trimmed its growth estimates earlier this week in part on the vagaries of the crypto market. Eventually, at a price of $5,000, some chip firms may break even over two years, stated Morgan Stanley.