One year ago we have seen the record-high prices of Bitcoin. Right now, we’re facing the record-drop of the price of this popular cryptocurrency – over 80% down over past 12 months.
Since the price is falling down so fast it’s becoming increasingly uneconomic to mine Bitcoin. The costs of keeping the machines work are mostly at the same level, but the profits are getting lower and lower hitting the border of profitability.
Let’s see what JP Morgan tells us about this situation:
The latest decline in prices towards $3,000 per bitcoin has also seen a sharp decline in the hash rate. This suggests that prices have declined to a point where mining is becoming uneconomical for some miners, who have responded by turning their mining rigs off. What had been striking with the Bitcoin hash rate was that it peaked only recently at the end of October i.e. much later than the peak in Bitcoin prices at the end of 2017. Combined with price declines, the surge in the mining activity in the first ten months of the year, partly driven by chip manufacturers deploying miners to test their products and partly by miners adopting more efficient operations, created a collapse in mining profitability from $4/Day for 1THash/s at the end of 2017 to $0.16 currently. Therefore in the absence of any stabilization in prices, the least efficient miners were forced to exit mining activity abruptly.
They also provide us with a chart, showing how big the decline in Bitcoin mining profitability this year is:
Even if Bitcoin is a pure virtual thing, the costs of mining it are similar to the conventional resources mining. So when prices of it go down so fast, many miners need to consider closing their previously profitable operations.
Source – Business Insider
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