How Bitcoin Mining Profitability Could Point To Capitulation Still Ahead

Bitcoin mining profitability is subject to a number of things and recently these factors have been affecting mining profitability, hence putting it under pressure. The amount of money miners are making from carrying out their activities are low, contributed by the growing hashrate, mining difficulty, and last but not least, the price of the digital asset. As miners look to the future from 2022, what do they need to make their mining activities more profitable?

Bitcoin Mining Profitability Down

Bitcoin mining profitability has been heavily impacted by the declining prices of the digital asset. Looking at some of the most popular miners, the Antminer S9 and the Antminer S19, there is a clear indication that the profitability from mining activities has been declining.

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The Antminer S9 would cost a miner $26,000 worth of electricity to mine a single bitcoin, while its counterpart the Antminer S19 would cost $31,000 worth of electricity to give the same result. This is putting the price per kWh at $0.05. It means that electricity running costs alone are costing more than half of the realized revenue from mining a bitcoin. 

BTC mining profitability down | Source: Arcane Research

In total, an Antminer S9 would give a cash flow per BTC of around $15,000 going by the current price of the digital asset at $41,800. As for the Antminer S19, this number would come out to about $9,000 to $10,000 at current prices. 

What this shows is how the stagnating price of bitcoin is putting miners’ profitability under intense pressure. Coupled with the fact that the total network hashrate has skyrocketed since the China ban on mining, it has also had a negative impact on mining profitability. And if this does not ease up soon, it will continue to put significant pressure on profitability. The only way to then offset this pressure would be for there to be an increase in BTC’s price.

BTC price trending at $41,800 | Source: BTCUSD on TradingView.com

An obvious trend when mining profitability goes up is the rate at which miners build out their capacities. This was the case in the Autumn run when mining capacity had increased drastically, causing these miners to add to their existing capacity. It is expected that the space will begin seeing the evidence of this increased capacity in the coming months.

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Nevertheless, the price of BTC still remains the biggest factor in mining profitability. Regardless of how high the mining difficulty of the hashrate climbs, if the price of the digital asset is high enough to offset all running costs and return a healthy profit, then miners will see this pressure ease off.

Featured image from CoinDesk, chart from TradingView.com