Fundstrat Analyst Says the Cost of Mining Bitcoin is No Longer Profitable
Some estimates are suggesting that it’s no longer profitable for miners to produce bitcoin, with March earnings half those of December’s.
In a report from CNBC, Thomas Lee, managing partner and head of research at Fundstrat Global Advisors, said:
Bitcoin currently trades essentially at the break-even cost of mining a bitcoin, currently at $8,038 based on a mining model developed by our data science team.
Fundstrat looked at three things: the cost of equipment, electricity, and other overhead such as maintaining cooling facilities.
In recent weeks the value of the cryptocurrency market has slumped considerably. Earlier this week, it was reported that an upcoming advertisement ban related to digital currencies on Google, a massive selloff of bitcoins from Mt Gox, and regulatory pressure were the three major factors affecting market prices. As a result, the price of bitcoin fell to a low of $7,800 during early morning trading yesterday.
With the cost of mining bitcoin considerably expensive, many may lose the incentive to continue mining if the cost to produce a new coin outweighs the reward. This is certainly the thinking from Shone Anstey, co-founder and president of Blockchain Intelligence Group, who said:
In some cases the miners may simply turn off the machines until the price comes back a bit. It’s got to be getting to the point that some of them may be losing money.
Not only that, but it seems that miners’ earnings halved this month compared to December as interest in bitcoin mining rose, according to Charlie Hayter, CEO of industry data site CryptoCompare. Not only that, but transaction fees have also dropped, another avenue where miners make money. In late December, a median transaction fee was as high as $34; however, at the time of publishing it is just above 20 cents, according to data from bitinfocharts.
Recent research has also shown how expensive it is to mine bitcoin in a list of 115 countries. Earlier this month, Elite Fixtures, compiled data that illustrated that South Korea is the most expensive country to live in to produce one bitcoin, costing $26,170. The least expensive country is Venezuela, with a price tag of $531.
According to Fundstrat, miners should start shutting down their computers when the price of one bitcoin is around $3,000 to $4,000 per coin.
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