BitMEX: Miners Could Still Profit by Buying Bitmain Mining Rigs at Below-Cost Prices

The crypto prices have plummeted considerably since mid-November. The decline has also affected the mining industry in the crypto world. Also, the Bitcoin hashrate has fallen by approximately 31% since the beginning of November 2018. That percentage is equivalent to almost 1.3 million Bitmain S9 machines.

Is it Still Worth Mining Crypto?

However, there could be a silver lining in this dark crypto world. According to the official BitMEX analysis, miners may profit by acquiring Bitmain mining rigs at below-cost prices.

These analytical results imply that crypto miners are struggling. But, not all miners get impacted with the same intensity due to the recent market plunges. The higher cost miners are the worst hit as the market implodes.

Bitcoin price is down almost 45% compared to the start of November 2018. The falling prices are undoubtedly inserting considerable pressure on the mining industry.

The prices have resulted in two large downward difficulty corrections so far to Bitcoin. The 7.4% adjustment on November 16 was the biggest since January 2013 while the 15.1% adjustment of December 3 was the biggest since October 2011.

Mining Revenue and Cost

The Bitcoin mining revenue has declined from almost $13 million to almost $6 million on a daily basis since the start of November tot eh start of December. In the 6-day period ending 3rd December, there were 21.8% fewer blocks found compared to the expected 144 per day. Miners left before the difficulty adjusted accounting for this drop.

Miner Profit Margins

Before the recent crash, the industry was making gross profit margins of approximately 50%. However, these margins assume that electricity is the only cost involved.

After that crash, the margins fell to around 30% for Bitcoin and 15% for Ethereum. The margins for Ethereum have declined sharply than those of Bitcoin although it is not explicable.

The profit margins for the Bitcoin Cash ABC went negative after the split into Bitcoin Cash SV and Bitcoin Cash ABC. The two groups mined uneconomically in a relentless effort to acquire the most work chain. On November 25, the Bitcoin Cash ABC mining profitability rose to the same levels with those of Bitcoin.

The end of the ‘hashwar’ was pointless since there was no significant effect on either the value or the coins themselves. Data shows that uneconomical mining may resume as the total work chain for the two coins gets closer again.

Costs

Various costs are incurred in the crypto mining process. Electricity, capital investments, building, and maintenance costs are the major expenses involved. The recent price crashes mean that miners invested a lot in equipment and achieved large negative returns-on-investments. These huge losses are forcing many miners out of the industry which in turn has reduced the prices of the mining equipment.

The bear market has taken over and prices are declining regardless of the news or any investment flows. The prices are weak irrespective of any miner selling and the trader sentiment rules the crypto markets. It is a significantly rough time for the mining industry currently.

But, for the miners with lower costs, the situation may be better than expected. If these miners got their equipment from Bitmain at below-cost prices, they could still be profitable even when depreciation and many other administrative expenses are put into context.

Full BitMEX report

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