The company ARK Invest published a document assessing the profitability of Bitcoin mining. The study estimates that mining 1 BTC could cost up to USD 5,000.
In early March, the ARK Invest Team released a report assessing the way mining works on the Bitcoin network and highlighting the cost of the activity. This last aspect is fundamental to understand the reason why China is no longer a Bitcoin mining paradise. The company started from the analysis of Bitcoin’s historical hashrate and advances in mining equipment since 2013.
In this sense, the study indicated that, since that year, miners have spent around USD 17,000 million to continue to operate and expand. Meanwhile, profitability varies based on the capital and available hardware, along with operating costs related to electricity, cooling, and equipment maintenance.
To help better understand the cost of mining on the Bitcoin network, the researchers give the example of a miner with a 16 TH/S hash rate that costs USD 750. The device consumes 1 kilowatt of electricity that costs 5 cents an hour, which incurs maintenance, leasing and cooling costs of 3 cents per kilowatt an hour. At a cost of 3 cents per kilowatt an hour, mining 1 BTC costs USD 5,000.
Geography of Mining Changes
As mining profitability can vary, depending on the cost of hardware and electricity, ARK Invest also focuses on geography. In this regard, it should be remembered that China is home to several of the world’s largest mining farms.
From the start of the activity, the infrastructure of the country allowed miners to scale rapidly as several producers of most mining chips are there. They explain that this feature of the Asian giant allowed miners to save time, shipping costs and general costs, given the short repowering cycles of the equipment.
Besides, they say that the owners of Chinese mining farms were able to enter into agreements with power plant owners to access cheaper electricity. In this way, the two aforementioned aspects made China, for a time, the preferred destination to do Bitcoin mining.
However, a series of changes currently cause Bitcoin mining to be profitable in other countries of the world. The life cycles of mining equipment are growing as competition in the market leads to an increase in the quality and reliability of products. A long life cycle of the mining equipment has the potential to reduce the overall maintenance costs.
Inconvenience to Chinese Government
Besides, the study takes into account the Chinese government’s increasing pressure on mining and mining equipment manufacturers in the country. The regulation on electricity prices and land use in China has caused a geographical diversification of the industry. Countries like Thailand, Canada, and the USA are currently offering miners competitive rates for electricity costs.
In this regard, the miner manufacturer, Canaan, states that an increasing portion of its income has derived from sales to customers outside the People’s Republic of China. Furthermore, they consider that the changes in policies and laws related to the holding, use or mining of Bitcoin could harm their business operations.
By Alexander Salazar