Bloomberg: Even if Bitcoin falls another 50%, mining will still be profitable

Bitcoin mining is so profitable in China that miners can still make money even if the price of the virtual currency falls by half, according to a report released by Bloomberg New Energy Finance (BNEF).

Sophie Lu, an analyst at Bloomberg New Energy Finance, said that even at the maximum electricity price set by the Chinese government, Chinese miners can make money as long as the price of Bitcoin can stay above $6,925. The last time the price of Bitcoin was in this range was in mid-November last year. It is currently priced at about $13,900.

The price of bitcoin has risen about 14-fold in 2017, and the electricity required to mine the virtual currency has also grown. About three-quarters of bitcoin mines are located in China, mainly in provinces with cheap electricity.

“Bitcoin mining is likely to be profitable in China regardless of electricity prices,” Sophie Lu wrote.

Cryptocurrency electricity use is facing more scrutiny, especially in China, where the government is concerned that mining farms are taking advantage of China's low electricity prices. Cryptocurrency trading requires energy-intensive computer networks, and the industry currently uses as much electricity as 3.4 million American households, according to the Digiconomist Bitcoin Energy Consumption Index. Due to the large amount of electricity consumption, there have been rumors of some government departments and regulators cracking down on mining farms since last year. So far, according to Leifeng.com, the more certain official statement should be neither support nor opposition. It is said that some mining farms have begun to move to other places.

Electricity consumption surges

Bloomberg New Energy Finance said that by the end of 2017, the electricity required for Bitcoin mining had increased to 20.5 terawatt-hours per year. This is equivalent to more than half of the annual electricity consumption of BHP Billiton Ltd., the world's largest traditional mining company (38 terawatt-hours), or one-tenth of South Africa's annual electricity consumption.

In China, bitcoin mining farms consumed 15.4 terawatt-hours of electricity last year, but that’s only a tiny fraction of the country’s massive electricity demand. Although China has the largest number of bitcoin mining farms in the world, they only consume 0.2% of the country’s annual electricity generation.

Lu said it is difficult to predict how much electricity Bitcoin mining will consume in the future because it depends on how efficiently computers can solve mathematical puzzles and how many computers are added to the process. Miners perform the complex calculations required to confirm Bitcoin transactions and are then rewarded with Bitcoins, which is how mining works.

In China, while Bitcoin mining can be profitable even at the highest electricity price of $0.13 per kilowatt-hour, many companies can take advantage of excess power capacity in some areas to reduce electricity costs to $0.03 per kilowatt-hour. At this electricity price, the Bitcoin price only needs to reach $3,869 to make miners profitable.

Lu said that even if China succeeds in limiting Bitcoin electricity use, miners can easily move to other regions. It is estimated that the lifespan of mining computers will not exceed two years, and the price of other related equipment is relatively cheap.

“China’s restrictions on Bitcoin electricity usage may not have that much impact on the global Bitcoin market,” Lu wrote.