As crypto investors know all too well by now, November was not a good month for the virtual currency space. Conversely, December has been quiet and calm in terms of volatility and price swings in the crypto market. But one positive from the downturn is that the cost of mining it is going lower.
During the last few weeks,
Bitcoin (BTC) fell from US$6,300 to US$3,500, establishing a new low in more than a year. It has also led to a bigger problem in the space – miners stopped being profitable. There were even some reports
of miners in China shutting down their operations entirely.
But as the price of Bitcoin falls difficulty in the network processing hash rates decreases, helping miners profitability with lower prices. It is possible to see that Bitcoin’s hash rate has been reduced by almost 50% since its all-time high registered a few months ago in August.
Before the network adjusted its difficulty, several analysts warned about the
unprofitability of mining Bitcoin, something that would make mining this virtual currency more expensive than the reward provided by the network.
In a
conversation with MarketWatch, Sam Doctor, the head of data science at
Fundstrat Global Advisors, said that miners are still recovering from the losses in which they incurred from mining BTC.
“Our model suggests the cash cost of mining each BTC on the Antminer S9 is now US$4,500, down from US$5,300 in September. Depreciation expense has fallen to US$1,300 versus US$2,000 in September, reflecting a lower rig cost as newer devices have come to market. Fully loaded breakeven is now US$5,700, compared with a breakeven of US$7,300 in September.”
A few days ago, the second largest drop in mining difficulty on the Bitcoin network was registered. The difficulty changed -15.1%. Back in November 2011, Bitcoin’s difficulty fell by 18%.
This is one of the most interesting things about BTC. If the hash rate drops, difficulty also does, which in turn allows more miners to profit during hard times.
In the last 24 hours, Bitcoin lost 4% of its value and it has a market capitalization of $66.2 billion. Each BTC can now be purchased for US$3,843 according to
Einstein Exchange.
