Research tells of massive drop-off in Bitcoin mining over the last six weeks, and seriously squeezed profit margins.
According to research by BitMEX, along with the 45% fall away of the price of a bitcoin since the start of November has come a commensurate decline in mining interest. According to its latest blog, the hash rate underpinning the Bitcoin blockchain in has decreased by almost a third – 31% – in the same time-frame, an amount that it equates to 1.3m of the top-of-the-range Bitmain S9 Antminer machines being turned off during that time.
While it notes the two large difficulty adjustments that have come alongside this drop in hash power – the biggest changes in mining difficulty since 2013 and 2011 respectively – the researchers reckon that duesto a delay in those self-righting procedures, revenues from mining have more than halved in the last five weeks. Whereas, at the start of November, miners were collectively earning around $13m a-day that number is now around the $6m mark, with at 22% decline in the expected number of blocks mined on top of the drop in price making matters worse during early December. This stacks-up to a fall in gross profits – assuming electricity, a $0.05kW/h as the only cost – from around 50% on Bitcoin at the start of November to around 30% now.
Ethereum miners have seen an even sharper decline in profit margins that Bitcoin, reflecting BitMEX’s assumed 54% drop-off in the price of ETH over since November began. According to its figures, with the hashrate falling only 20% in that time, gross profit margins for miners in that sector are down as low to 15% – assuming the same power costs. With other costs included, that means mining Ethereum could easily be a loss-making task at the moment, and BitMEX suggests the high number of enthusiast miners could be the reason that there has been less of a drop-off.
BitMEX notes that its estimations of profit do not include investment in machinery, or the other running costs associated with the mining business – like staff and infrastructure – beyond electricity expenses. With these in mind, it suspects that many miners will be in the red, having overspent on equipment that they are now finding it better to simply turn off. However, it points out that its estimation of power costs is just that, and that some miners could be faring better than its reckoning. The report concludes that it is “likely to be a very tough time for the mining industry,” but that “If the miners acquired their equipment from Bitmain at below-cost prices, they could still be in the green, even when including depreciation and other administrative expenses.”