Bitcoin computing power hits an all-time high, but are miners really making money?

Despite record highs in Bitcoin hashrate, miners are still struggling to make a profit.

On October 14, the Bitcoin network's hashrate climbed to a new all-time high (ATH) of 166 EH/s. But the problem is that despite the recent simultaneous rise in Bitcoin hashrate and price, it seems that only a small number of miners using "next-generation mining machines" are profitable at the current price level.

In the past few days, the price of Bitcoin has been hovering around $11,000. At the time of writing, according to Coingecko data, it is $11,353.13, with a market value of approximately $210.26 billion. At the same time, the Bitcoin hash rate fluctuates mainly between 130-140 ETH/s. At the time of writing, according to BTC.com data, it is 147.68 EH/s.

Let’s take the data from Thursday, October 15, 2020 as an example. By analyzing 18 known mining pools and one unknown mining entity, the top five mining pools by hashrate on that day include:

1. Btc.com (23.9 EH/s)

2. F2pool (20.6 EH/s)

3. Poolin (18.7 EH/s)

4. Antpool (15.9 EH/s)

5. Huobi (11.3 EH/s)

If you look at data from real-time mining hardware aggregator asicvaule.com and filter by electricity costs of $0.06 per kWh (as shown in the image above), you’ll find that among cryptocurrency miners based on the SHA 256 mining algorithm:

1. Only 13 mining machine products have a profit of more than $2 per day;

2. There are 33 mining machine products with a daily profit of less than $2;

3. There are 30 mining machine products with daily profits ranging from US$0.11 to US$1.89.

If we double the electricity cost to $0.12 per kilowatt-hour, then only 2 of the 43 cryptocurrency mining devices in the above statistical range based on $0.06 per kilowatt-hour electricity cost can make a profit.

The above chart shows the profitability of mining machines on the asicvalue.com platform on October 15th when the electricity cost was $0.12 per kilowatt-hour, of which only two mining devices were profitable.

The top two mining devices are Bitmain’s Antminer S19 Pro (110 TH/s) and Microbt’s Whatsminer M30S++ (112 TH/s), followed by the Whatsminer M30S+, as well as the Antminer S19, Whatsminer M30S, Antminer T19 and AvalonMiner 1166 Pro.

It is worth mentioning that many other cryptocurrency mining algorithms show higher profit margins compared to the SHA 256 mining consensus algorithm, such as Equihash, Ethash, Tensority, and Eaglestrong mining algorithms, which are more attractive to miners of these types of cryptocurrencies. Currently, miners mining tokens based on the SHA256 algorithm (including BTC, BCH, BSV) need to have an electricity cost of $0.06 per kilowatt-hour to make a substantial profit of more than $2 per day.

If the price of Bitcoin can rise by another $1,100 from the current $11,000 to around $12,100, it may be better for Bitcoin miners, as only at this price can miners get compensation from the block reward halving in May. In February this year, blockchain analysis provider Tradeblock estimated that the mining cost of Bitcoin after the block reward halving would be about $12,500/BTC.

On the other hand, historical data shows that Bitcoin's performance in the third quarter is always disappointing. In July and August this year, Bitcoin miners sold a large number of Bitcoins, resulting in a decrease of about 125 BTC in the net inventory of Bitcoin miners every week in the third quarter. However, data shows that the rhythm and quantity of miners' selling are relatively regular, and they are not sold in irregular quantities or abnormal ways. In fact, there are two main sources of selling pressure in the market:

1. Bitcoin miners who dilute the supply by selling BTC to the market (this is similar to the implicit "tax" caused by inflation);

2. The other is the cryptocurrency exchanges that sell Bitcoin on the market (they are similar to "taxing" traders).

It is worth mentioning that the selling pressure from Bitcoin miners and whales is mainly attributed to the previous long-term market downturn. When miners start to sell their Bitcoin, it is likely to trigger a serious market correction, because price fluctuations exceeding a certain range may trigger leveraged transactions and cause users' positions to be forced to be liquidated. Therefore, in theory, even if some small miners sell Bitcoin, it may cause a sharp price fluctuation due to the "butterfly effect".

In fact, some Bitcoin miners have been selling Bitcoin since July, but the market has not been greatly affected. Despite multiple attempts by bears to drive the price below key levels, Bitcoin is currently hovering above the key technical support level of $10,000. Bitcoin has responded well to high levels of selling pressure, and this resilient trend suggests that a long-term cautious bullish forecast for prices can be made. In addition, several other on-chain indicators also indicate that Bitcoin is now in a healthy accumulation phase. Therefore, in the long run, industry insiders believe that this miner sell-off is not enough to affect the next bull run.

Another indicator worth paying attention to is the mining difficulty. The current difficulty of the entire network is 19.30 T, and the difficulty increase is expected to continue, which means that it will be more difficult than ever to find a Bitcoin network block that can be mined. At the time of writing this article, there are still 4 hours before the next mining difficulty adjustment, and the next difficulty adjustment is predicted to increase by 4.35% to 20.14 T.