According to a crypto Influencer Alex Krüger, the recent surge in the price of bitcoin, bitcoin mining have become profitable again. Showing the calculation through his tweet, Alex suggested that this is the first time since December 2018, when the price hit 3200$, the mining operations have become profitable in the U.S.
Alex’s calculations showed that around 15th December 2018, when the price of bitcoin had hit a low of 3100$, the mining operations became non-profitable. He calculated that after the mining rig depreciation, the cost of bitcoin through mining turned out to be 3,850$, while the market valuation of bitcoin was at 3,200$, thus making mining non-profitable. However, as of now the price of bitcoin through mining after rig deprecation calculates out to be 4,350$ while the trading price of bitcoin is around 5,400$. They are thus making mining profitable currently for the first time since December.
The bitcoin mining operational breakeven for efficient mining operations currently stands around $3550. pic.twitter.com/gQrNYBcvLH
— Alex Krüger (@krugermacro) April 21, 2019
Krüger’s calculations are based on a few assumptions, and he has priced the price of electricity at 5.5 cents per kWh, while he priced Antminer S9 rig at 200$ with a depreciation period of 1.5 years. While these may be true for some countries, they do not hold for others.
His calculations are more than what some Chinese miners pay for electricity in China. The electricity price in China is around 3.5 cents per kWh, and this recent price cut is due to the generation capacity of power plants in mainland China being more than the demand. Applying the same criterion as Alex, we have calculated that the price of a mined bitcoin in China is around 3000$ which makes a profit of more than 2000$ for Chinese miners. Krüger in one of his tweets said that:
An exact number is heavily dependent on electricity cost. e.g. last December Coingeek reported an electricity cost (inclusive of all operational expenses) of $0.073. I am using $0.055.
A change in the electricity price can cause massive disruptions in the mining price. However, since the majority of bitcoin mining operations are being run out of China, it is safe to assume that many miners have seen positive balance sheets even during the downfall of bitcoin.
The Real Cost of Bitcoin Mining Around the World
All around the world, bitcoin mining has a different cost associated with it. A U.S. based electricity company calculated the cost of mining bitcoin all around the world. They used standard rigs made up of Antman S9s as the standard metric. According to their calculations, South Korea is one of the most expensive countries to mine bitcoin, with the cost being upwards of 26,000$ for a single mined bitcoin. Germany, Portugal, and Belgium are also right behind South Korea in the most expensive countries for bitcoin mining race. While Venezuela due to its government subsidized, electricity is the cheapest country for bitcoin mining, costing only 531$. The calculation showed that most of the 114 countries researched were too expensive for mining bitcoin due to high electricity costs.
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While the price of bitcoin mining is one face of the coin, the legality is another pressing issue. Chinese miners embody a contradiction; more than 80% of the world’s bitcoin is mined in mining rigs in China while its trading is banned in the country. However, this will change soon, and the country is planning to ban Bitcoin mining. The National Development and Reform Commission (NDRC) of the Chinese government last week issued a plan titled “guidelines for the guidance of industrial structure adjustment.” In that plan, 450 listed practices are wasteful and hazardous and should be eliminated immediately. Bitcoin mining is one of those practices contained in the policy. All of these practices will be eliminated according to the wasteful energy rule enacted by the Chinese cabinet in 2005.
In case the Chinese government bans bitcoin mining, the resulting hash rate deficiency would be a golden opportunity for miners from other countries. India, Bangladesh, and Iceland owing to their cheap electricity prices can take full advantage of the situation.