- Bitcoin Mining Difficulty dropped by 7% – the highest drop after a continual rise in 2019.
- New age miners and the halving due in May next year are making things difficult for existing miners.
- Crypto-analyst, Dovey Wan tweets about the possibility of miners getting “rekt price does not double.”
Bitcoin has had a dominant bull run during Q2 and Q3 of 2019. The price of BTC was well above the break-even cost of mining around $5600-$7000.
Nevertheless, while the miners are still making a profit at current prices, the future seems highly uncertain for them.
Bitcoin difficulty sees a major drop first time in 2019, abt 7%
Mainly due to price as lower end rig has shut down, partially due to end of raining szn, when cheaper excessive hydro is no longer widely available
Many miners will rekt badly if price does not double in halving
Current Price Depressing for both New and Old Miners
As halving comes closer, the old miners stand the risk of making taking considerable losses as the price is close to break-even cost currently. Moreover, the newer miners are far more efficient and powerful, eliminating the older miners in large numbers.
Wan also noted that ‘assuming a per hour electricity cost of $0.05 Kwh, the cost of mining 1 BTC on S9 (current) is ~$7000, S17/M20S (new miners) is $3000‘. Hence, a massive shift in the ecosystem seems inevitable.
Moreover, while older miners face profitability issues, new investors have to cover their capital costs and depreciation of miners. Wan noted that “the static payback/break-even for Capex now is over 300 days.” In the current technological environment, a generation of miners lasts only about 3-5 years. Hence, 2020 poses severe risks to the mining business in terms of profitability.
Expert Analyst Suggests Price Should Rise
Expert on-chain crypto analyst, Willy Woo, has charted the effect of changes mining ecosystem on the price of Bitcoin. The mining difficulty ribbon on moving averages had been compressed for a reasonable amount of time.
As the weaker miners begin to capitulate, the selling pressure in the market will be reduced. This will effectively increase the price. Moreover, with the increase in price, new miners will be able to cover their cost of depreciation as well.
Nevertheless, the volatility and the risk of global regulations on Bitcoin is tremendous. Hence, if the price does not make a bullish move and bears continue to push the price lower, the miners will stand to face huge losses. They will be closely watching the price action and try to cover their risk soon.
Do you think that the price will support the mining ecosystem, or they will have to bear the cost and stand the risk of shutting down? Please share your views with us.
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Nivesh from Engineering Background is a full-time Crypto Analyst at Coingape. He is an atheist who believes in love and cultural diversity. He believes that Cryptocurrency is a necessity to deter corruption. He holds small amounts of cryptocurrencies. Faith and fear are two sides of the same coin. Follow him on Twitter at @nivishoes or mail him at nivesh(at)coingape.com