Ten years ago, someone could sit in the house and earn 50 Bitcoins for simply solving a mathematical puzzle. However, at the moment, the mining world has changed drastically as the interest and adoption of cryptocurrencies has soared.
The Bitcoin price has been on a meteoric upward trend that saw the leading cryptocurrency doubling in value in the last five months. The Bitcoin hash rate increased by more than 25% during the same period too, reaching its highest ever value not that long ago.
By March 2020, Bitcoin did manage to complete its third halving event that saw BTC amount mined each day reduced by a half. Since all these factors coincide, it can be challenging figuring out if crypto mining is still profitable in 2020.
Below are some of the most important things you need to know that will help you determine the profitability of crypto mining in 2020.
The Current State of Crypto Mining
Currently, mining of Bitcoin is dominated by large mining operations and mining farms with thousands of ASICS under one roof. All these operations benefit from the scale of economies together with financial acumen to help in hedging their operations using options and futures.
More governments are exploring ways in which to get into crypto mining to help boost economic revenue. The Minister Digital Development, Innovation and Aerospace Industry in Kazakhstan, Askar Zhumagaliyev, stated:
We studied the experience of other countries, such as the United States, Sweden, and South Korea. We see today that activities such as digital mining and cryptocurrency are part of our everyday lives. I would like to note that there are 14 such digital farms in Kazakhstan and they are built near energy sources that can connect to them. They have already brought 82 billion tenge (US$201.7 million) of investments in the country.
As we speak, the Bitcoin hash rate was still below its all-time high from March 2020. However, it is anticipated that it won’t last long and that at some point in the summer of 2020; the hash rate will break its old records.
Having a high hash rate will mean that it will be more complicated to make profits while mining Bitcoin. With a high hash rate, the number of miners will have to be increased, meaning you will be earning less from mining.
Before you get into crypto mining, you must consider the hash rate and its general effect on your profit-making capability.
Crypto Mining Costs
The main costs that you will incur when it comes to crypto mining are equipment and electricity fees. However, when you stay in an area with cheaper electricity, this will put you at an advantage. It explains why many in the Bitcoin mining space have found profit in China since the country has cheap hydroelectric power, and Venezuela is well-known for its state-subsidized and affordable electricity.
Mining at the university dorm, where the cost of electricity is always fixed per semester, is also a significant issue in most of the university’s housing budgets.
ASIC miner cost is another thing that you can never ignore. Topline miners can cost between $1,000 and $3,000. It disadvantages the small guy who is purchasing a few miners compared to the larger mining farms that get huge discounts for bulk buying.
Considering the high cost of an ASIC miner, you must go for top-quality equipment since the last generation of miners does offer the best ROI.
The old rigs are relatively inefficient that the cost of electricity supersedes any potential returns unless the electricity source is free. ASIC miners also become obsolete much faster when compared to anyone else.
For example, when you purchase a miner immediately, it gets into the market; there are chances you will get between 6-12 months of its efficiency before the next miner generation comes into the market.
It is still possible to use old equipment in mining, although the cost to reward ratio will be quite disappointing. There are also the mining software fees, cooling fees, mining pool fees, set up costs, and rig maintenance costs to factor in.
Potential Mining Revenue
A single modern Bitcoin miner, such as Whatsminer M20S, can generate up to $8 in Bitcoin revenue daily. When you compare this to the mining revenue other cryptocurrencies like Ethereum that are mined using graphic cards, you can see that the Bitcoin mining revenue is twice the mining cost when you use the same GPU amount you could purchase for a single ASIC. For example, 13 AMD RX graphic cards can cost the same price as a single Whatsminer M20S.
The crypto miners earn bitcoin by collecting something known as a block reward. With the Bitcoin fees, its users pay miners securely and safely record their bitcoin transactions on the blockchain.
Bitcoin Mining Taxes
Tax payments on your mining rewards are quite specific when compared to Bitcoin mining profiting, which is never certain. Every miner has to be aware of the relevant tax laws when it comes to Bitcoin mining in their region.
Is Bitcoin Mining Still Worth It?
For crypto mining to make some financial sense, you will have to get a cheap electricity source and have a strong understanding of how to optimize your ASIC operations.
One important thing you have to consider when it comes to running a cost-benefit analysis is that ASIC will always let you mine different coins, including BCH, BCHSV, and BTC, among others. They will enable you to switch between various networks to arbitrage opportunities. With that in mind, the mining of Bitcoin is among the most profitable opportunities. It would help if you never counted on the financial windfall from mining other types of coins.
As it still appears that we will be getting into a new crypto bull market or, at the very least, that a protracted depression in the costs is unlikely. You can always count on the costs at least to remain where they are currently if not increasing as we get to 2021.
One of the best ways you can always look at mining is as a hobby. Although mining might be profitable, there are times when it might not, but the experience it offers is where the enjoyment comes.
Mining rig setups, learning more about Bitcoin, network security contributions, and bragging to your friends that you do Bitcoin mining is all part of the fun. One of the best methods to make money is purchasing Bitcoin from an exchange and holding it in your wallet. However, when you have a realistic idea of what mining will be like and what amount you can expect to get, it will be worth the effort.
The Future of Crypto Mining
Since miners are the backbone of any cryptocurrency network, their role won’t be easily eliminated. That being said, in the rapidly changing global digital economy, crypto mining will need greater computing power to ensure profitability.
There’s a need for a core mining pool technology that will provide stable output for every unit cost of power used. Eco-friendly mining solutions hold the future of crypto mining as power producers channel their production to the mining grid.