When and where is bitcoin mining profitable? These are the margins in bitcoin mining

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• Complex and energy-intensive mining process
• Bitcoin mining for private households in Germany is not profitable
• Stocks of mining companies benefit from the Bitcoin price

In contrast to the proof-of-stake process at Ethereum, the cyberurdevise Bitcoin is mined in a complex and energy-intensive mining process, the proof-of-work. But how does prospecting work and what factors determine success?

Bitcoin mining: four factors determine profit

In addition to legal regulations, four factors in particular play a role in bitcoin mining: the bitcoin price, energy costs, the hash rate and the bitcoin difficulty.
Since miners are paid in bitcoin, the level of bitcoin determines revenue. Miners currently receive a reward of 6.25 Bitcoin per block/hash. At the current price of $28,920, this equates to $180,750 per block.
Of course, the costs have to be offset against this, especially the energy costs. In addition, there are also costs for the purchase of hardware and infrastructure for the mining devices.
The third factor that determines whether Bitcoin mining is worthwhile is the so-called hash rate. In order to find the new block you are looking for, the mining devices have to calculate as many hashes (random numbers) as possible per second. The latest mining devices create 100 terahashes per second, i.e. 100,000,000,000,000 hashes per second. The miner’s share of the total hash rate (network of all miners involved in the search) then determines the probability of finding the block.
Since the Bitcoin code stipulates that a new block should be mined every 10 minutes, the so-called Bitcoin difficulty, i.e. the difficulty of finding the view, is adjusted depending on the size of the hash rate.

According to calculations by BTCH ECHO, which are based on current data (bitcoin price around 28,000 US dollars, hash rate at 377,430 exahashs/s, difficulty at 46,843 target hash), a miner can make profits with an electricity price of 0.10 euros per kilowatt hour achieve. Conversely, with a currently realistic price per kilowatt hour for private households in Germany of EUR 0.42, Bitcoin would have to be worth USD 122,000 in order for mining to become profitable.

When is bitcoin mining profitable?

The “Puell Multiple” indicator measures the ratio between the daily earnings of miners in US dollars and the 365-day moving average of the same. If the value is above 1, miners are earning more than average over the last 365 days. On-chain analytics firm Glasnode uses this index to show that bitcoin miners are still under pressure as they are currently 12 percent below their average earnings over the last year.

The “difficulty-adjusted puell multiple” indicator can be used to include the mining difficulty in the calculation. According to the coin update, this metric allows for a more realistic assessment of miner earnings, as Bitcoin mining adjusts the difficulty to keep the block production rate constant. According to this indicator, bitcoin miners are actually earning more than last year as the value surged above the 1 mark with the bitcoin price rally earlier in the year.

Profitable Miner: Where is mining currently worthwhile?

The Metallurgist portal calculates in real time the cost of bitcoin mining and the resulting profit/loss at the current bitcoin rate for 198 countries (hashrate and difficulty are not included). Miners are currently working most profitably in Kuwait. Here they can make a profit of $27,697.10 per mined Bitcoin. Algeria came in second and third with $24,909.19 and Sudan with $24,311.78. The US is currently ranked 52nd with a gain of $8,002.52, with China trailing behind at 79th with a gain of $3,601.60.

Germany is currently far behind in 163rd place, the loss for mining a bitcoin is estimated at 21,887.84 US dollars. At the bottom of the table is Venezuela with a loss of $217,439.69 per mined Bitcoin.

Unprofitable bitcoin mining: alternatives for miners

At times over the past year, mining companies in the US have been able to make more money by shutting down their equipment than by mining Bitcoin. As reported by Bloomberg, mining company Riot Platforms made about $9.5 million from shutting down their mining rigs — significantly more than they could have made from bitcoin mining at the time. The reason for this was the loss in value of Bitcoin and the massive increase in electricity prices due to the energy crisis. The miners fed the unneeded, cheaper electricity into the grid at higher prices, thereby securing the power supply in a grid that had become unstable.

High Energy Consumption: Bitcoin Mining and Environmental Concerns

According to a report by the New York Times, the energy needs of Bitcoin mining companies in the USA are increasingly coming into focus again. The research includes the 34 largest data centers in the USA and their energy requirements. As a result, the authors found that the miners use as much energy as three million US homes.

The Rockdale location in Texas, which is operated by Riot Platforms, was particularly striking. The power consumption here should correspond to that of 300,000 households. Criticism came immediately from the miners: In a press release, Riot Platforms tried to refute the results of the report and emphasized the importance of cryptocurrencies in times of a banking crisis. Unlike the data centers of the big tech companies Amazon, Facebook or Google, the mining operation does not produce any greenhouse gases, and the electricity finally comes from the cleanest power grid in the USA. However, the article in the New York Times paints a different picture: The electricity for the Riot data center comes to an above-average extent, namely 96 percent, from fossil energy sources (average is 85 percent).
This should give new fuel to the debate about the consequences of Bitcoin mining for the environment.

Riot Platforms stock and Co.: Bitcoin mining stocks are picking up again

“Many public miners were on the brink of bankruptcy late last year. At the current Bitcoin price, these companies’ cash flow has improved significantly and most of them should have no trouble meeting their commitments,” Aktien.news quoted as saying in mid-April Luxor analyst Jaran Mellerud on the current situation of bitcoin mining companies.

Falling energy prices with a simultaneous upturn in the crypto market are making Bitcoin mining more profitable again. The prices of the Bitcoin mining companies are positively spurred on by this. For example, the shares of Cipher Mining (+294.64 percent), Marathon Digital (+206.73 percent) and Riot Platforms (+240.41 percent) have increased significantly since the beginning of the year (as of May 7, 2023).

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