If you have been thinking about mining Bitcoin for a long time, but still have doubts about its profitability, Internet services may well help you estimate future profitability. Of course, you shouldn’t let the numbers mislead you, even if they seem very inspiring - everything looks lovely on paper, but in fact, nothing is clear-cut. However, with fundamental calculations, it will be easier for you to assess your own safety margin, and most importantly, you will see the purpose you should strive for by reducing operating costs.
Is mining Bitcoin worth it? Well, let's not beat around the bush for too long, turn to the Asicminervalue service and take a look at mining as a whole. You will most likely be pleased with the numbers, but don't rush in just yet - the mining algorithm is indicated in the Algo column, and you may be surprised to learn that Bitcoin is not the most profitable product today (1Q2023). The first place in terms of profitability goes to the Scrypt algorithm, which corresponds to such well-known cryptocurrencies as Litecoin and Dogecoin (we will get back to them a little later). However, we are interested in Bitcoin, so we will specify the SHA-256 algorithm in the search field and get the sample we want. Do not forget to specify the approximate cost of 1 kW of electricity at the bottom of the page.
What is Bitcoin mining?
Bitcoin mining is entering a new phase - miners are becoming more efficient, Bitcoin network difficulty is steadily increasing, the nearest halving (late 2023 - early 2024) will halve all mining income. In such circumstances, it is fair to ask the big question - what lies ahead? In other words, are we headed for disaster or for a brighter future?
It’s simple - the system itself searches for and finds a balance, where large players retain the maximum chances of prosperity, so don’t make apocalyptic predictions - despite decentralization and other blockchain perks, mining is primarily the business of very large players who can shift the Bitcoin rate as easily as the OPEC can shift oil prices. Exactly for the same reason, you don't have to be a whale to thrive along with them, just as you don't have to be a state oil producer to successfully trade oil.
Although the SEC and CFTC have not yet clashed over the question of whether Bitcoin is a security or a commodity, we know that Bitcoin behaves more like a commodity than a stock. More importantly, its behavior is determined not only by its commodity nature, but also by the behavior of major players that ensures its “production” and “sale".
Manufacturers of production means of Bitcoin-as-a-commodity act in unison with the industry, offering increasingly more advanced tools.
How does Bitcoin mining work?
Bitmain, the flagship of the miner production, has introduced the Antminer S19 XP Hyd model with hydraulic cooling. Today, this device with a mining power of 250-255 TH/s and a consumption of 5200-5304W offers the maximum Bitcoin mining profitability, slightly over that of the regular Antminer S19 XP (140 TH/s, 3010 W).
Let's go to the miner store and make sure that these two machines are priced according to their capabilities. As always, you can increase capex in order to save on operating costs, but prolong the pay-off period, or vice versa - buy cheaper, but lose your profit on endless daily losses.
You should remember that Bitcoin mining is a long-term business where not the fastest, but the most thorough player survives. That’s why it’s best to part with the idea of quick profit using several cheap devices, and build your mining infrastructure with at least the next ten years in mind. This means that the more efficient (and more expensive) your mining hardware is, the more chances you have to get your investments back during the Bitcoin price peaks between halvings. With weaker and cheaper equipment, you will also succeed, but it may become unprofitable in the next 4 years, and you will have to spend money on replacing it, negating all the previous efforts.
In other words, with mediocre equipment, you will stay afloat, but you will never move from being a dreamer to being a winner.
The pros and cons of mining Bitcoin
Why engage in Bitcoin mining if Litecoin and Dogecoin are more profitable today? Is it worth mining Bitcoin? The answer is contained in the question itself. Today doesn't mean always. Some time ago, online services demonstrated the overwhelming advantage of the Kadena algorithm for a long time, whereas mining Kadena today is far from exciting.
Pros
The main advantage of Bitcoin mining is its relative stability compared to other PoW cryptocurrencies. Anyway, Bitcoin is the king, and everything depends on its behavior, so no matter how good Litecoin is, sorry, bro, you're nobody without Bitcoin. (Dogecoin is a double nobody without Bitcoin and without Elon). Since the highs of 2021, Bitcoin has dropped 4.5 times, Litecoin - 10, Dogecoin - 15 (Kadena - 35). With such acrobatics, investing in any production seems questionable, but the benchmark always has an advantage - when it sneezes once, the rest sneeze twice, thrice, and some even take sick leave.
Bitcoin mining is not only the production of a cryptocurrency, it is the ideology of the future. Even the SEC treats Bitcoin with due respect and is in no hurry to label it a security. Just like in a famous poem: “Listen! If stars are lit, it means - there is someone who needs it.” And Bitcoin is definitely a star that was lit for a reason, whereas other cryptocurrencies in our crypto sky are more like artificial satellites of the Earth than stars (they can also twinkle in the dark, but that’s about it).
An attentive user may object, noting that the cryptocurrencies capable of a major fall can also grow just as strongly - therefore, mining them is just as good. This is true, but only partially. Let's go back to the basics: mining is a business, and a risky one since Bitcoin is a so-called risky asset. Therefore, risk limitation is more important than certain profit and profitability goals in this business. The risks of mining Bitcoin are obviously lower than the risks of mining any other PoW cryptocurrencies simply because Bitcoin is a benchmark with a much larger capitalization. It's true that everything may change, but we have to proceed from the reality that we are in, and where nothing indicates tectonic shifts so far, rather the opposite.
Cons
Bitcoin mining is essentially unavailable to the average user today. After assembling your mining farm, you will connect to a large mining pool and share the rewards with everyone in it. Of course, for the mining romantics, this is not at all as attractive as doing something on your own, without leaving your home, right on your computer. However, that time is gone for good.
You will need a separate room, cheap electricity and considerable patience to monitor the situation, responding to failures, breakdowns and other situations quickly. Mining will take up all of your time, so don’t even hope to combine it with other activities.
Inexpensive miners offer the illusion of an early payback, but this strategy is unlikely to be profitable in the long run. You will be required to make significant investments in high-quality equipment in order to achieve maximum average efficiency over the next 6-8 years.
The legal status of mining still remains vague in most countries, as does taxation. You should take into account the obvious regulatory risks that can critically reduce the profitability of mining on “bad” equipment.
You will have to hire workers and create an entire enterprise if you don't want to spend the rest of your life on your own mining farm, doing everything yourself.
Bitcoin mining rewards over time
Mining rewards are halved approximately every 4 years as a result of the so-called halving. Is Bitcoin mining still profitable?
The news often talks about “hard-to-recover oil reserves,” which are unprofitable to extract as long as oil can be extracted by conventional means. However, let's imagine that there is no more “conventional oil,” and we are moving on to the “hard-to-recover” kind. What will happen in the market? The price of oil increases accordingly, and its producers receive a corresponding profit.
Bitcoin halving is a kind of transition to “hard-to-recover reserves,” since there are no others left. The price of mining increases twofold, and Bitcoin price follows it. An attentive user will ask again, who will buy these hard-to-recover Bitcoins at the new price? Oil is one thing - you can't go anywhere without it, but Bitcoin is different - it’s neither a fuel, nor a precious metal, nor any other valuable fossil resource.
The answer is simple - those buying it now will also buy it at new prices, just as before, and won’t even blink an eye. The Bitcoin price rise will happen casually and won’t surprise anyone, the market balance will be completely preserved, all the key market players will stay where they are and continue to accumulate Bitcoin. Remember that “consuming” Bitcoin is equal to its accumulation, because it is a global game, and no one will give it up simply because of some halving. There is a whole century of these halvings ahead of us!
Is Bitcoin mining profitable now?
Is it still worth mining Bitcoin? No doubt, Bitcoin mining is profitable. With a consistent approach, you can achieve very good mining efficiency indicators, which can be evaluated using various online services, for example, Cryptocompare.
Enter your equipment’s hashrate and energy consumption, and the cost of a kilowatt of electricity. Depending on the service, the results will differ, but not significantly. Nevertheless, always keep in mind that the figures you get are a reflection of an ideal world without force majeure or other troubles. Instead, these figures should lead you to think about your margin of safety. Remember that your main task is to limit risks, and getting a systematic profit is the second.
Risks of Bitcoin mining
Bitcoin mining harbors many risks, the main ones being regulatory and infrastructural. It is best that the authorities do not disallow mining, and your energy resources are used legally. You also need to pay close attention to computer security. Everything else is a matter of technique.If you are fundamentally strong, then nothing and no one will prevent you from becoming operationally strong, except yourself.
Taxes on Bitcoin mining
The approach to taxation of Bitcoin mining depends on your jurisdiction of operation, but even where the legislation is extremely vague, no one will ever tell you that mining is not taxed. In countries where mining is legally defined, you will most likely easily find software for calculating the corresponding tax. In all other cases, you should decide how to declare your profits after consulting with your tax advisor.
Is mining Bitcoin worth it? FAQ
How long does it take to mine a Bitcoin?
It depends on the mining power of your mining farm. The higher it is, the faster you will get a Bitcoin. However, mining profitability is much more important: you can get 10 Bitcoins, but they may all go to covering the cost of electricity. When starting the mining process, be sure to evaluate potential profitability using online services.
How profitable is Bitcoin mining?
It depends on the equipment you use and the cost of electricity. In fact, these are your two main expense items - miners and electricity. Miners are a part of capex, and electricity is included in the opex. You need to maintain a balance of capital and operating costs in order to earn the maximum on a given time horizon.
When Bitcoin mining ends?
Bitcoin mining will end in about a hundred years, when 21 million coins are mined, so you don’t need to think about it just yet. It is worth starting mining today if your business model is designed for at least 6-10 years, since mining is a long-term business that requires significant investments.
Is there a future in Bitcoin mining?
Of course, Bitcoin mining has a future, since this business has already grown quite large, and a whole industry of related businesses is built around it. It makes no sense to make forecasts for 100 years ahead, but the next 10 years are viewed as very optimistic for mining. At the same time, the cost of mining will only grow despite the constant improvement of equipment.
