Mining’s Sustainability in crisis: HashFlare closes all SHA256 contracts
In recent times there has been a growing fear about the actual mining profits.
Considering that a BTC set up average cost is around $ 8,000 (by calculating electricity and other important factors), it can be deduced that mining is no longer a highly profitable activity as it had been shown in the previous months.
More and more often, miners are heading abroad to search for countries that offer electricity at lower cost.
Which are the most popular countries?
From the results of a comparison based on the average electricity tariffs of 118 countries conducted by Elite Fixtures, it appears that the cost to mine a single bitcoin is approximately between $ 531 and $ 26,170.
Cost varies from country to country; if we take the United States as an example, we can see that the average amount necessary for a bitcoin creation is $ 4,758, while in Russia it’s around $ 4,675.
Many miners have chosen Iceland to create their mining farm as this territory enjoys a moderate climate and hydroelectric energy abundance. South Korea is currently the most expensive place for mining. In fact, here would have been spent well $ 26.170 for mining a single bitcoin.
Tom Lee managing partner at Fundstrat Global Advisors, which is a research company based in New York, 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”
This means that the reward for the mining a single bitcoin is the same to the costs incurred for its extraction.
In fact, not so long ago, only at the end of 2017, the bitcoin value reached its historical maximum by touching $ 20,000.
This considerable event meant that many new users have wished to buy cryptocurrency and others begun to mine the currency by searching assiduously where the electricity price could be more advantageous, coming to choose countries decidedly further from Europe.
Among the first choices we find: Venezuela, Trinidad, Tobago and Taiwan.
If we try to calculate how much it costs to create 1 BTC with an S9 antminer in Italy with a current of $ 0.235/kw, it would cost almost $ 11.400 dollars without counting the cost of the infrastructure.
Making the same calculation in Bulgaria with the energy cost at $ 0.059/kw would cost around $ 2,832.
As we all know, mining profit depends on the transactions number and the current (BTC) bitcoin price, and here we can find business crisis reasons.
Due to the cryptocurrency value sharp decline in recent months, mining incomes have declined in direct proportion.
Moreover, in light of the facts, in March of this year, Tom Lee of Fundstrat predicted an unfavourable future for miners.
The fear concerning the unproductiveness of mining has significantly influenced the production of major components’ manufacturers needed in the industry.
For example, Taiwan Semiconductor Manufacturing (TSMC), the most important microchip and semiconductor manufacturer in the world, which has among its main customers Bitmain, producers of GPU Nvidia and AMD, has voluntarily chosen to reduce its production this year due fears related to mining income. In fact, TSMC produces specialized processors for cryptocurrency mining.
The company is afraid that the difficulty increase could significantly damage its profit, and expects to face lower demand for high-end chips, usually used for cryptocurrency mining.
Why be so afraid of this? Because it is believed that miners may prefer lower quality processors due to the uncertainty which is surrendering this sector.
TSMC CFO Lora Ho expects to obtain excellent benefits from the launch of new products on the market to the detriment of the cryptocurrency mining sector, whose demand will decrease given today’s conditions.
But it is not just companies that fear a real mining crisis.
Just today HashFlare, has communicated to its customers the closure of all SHA256 contracts. HashFlare is a company founded in 2013, which deals with cloud mining, or allows customers to buy part of its machines computational power, is forced to interrupt the services offered and suspend the SHA-256 contracts due to profit lack. The company has stated that management costs in recent times far outweigh the gains by making the user accounts come to zero.
As we understand the cryptocurrency mining is becoming a business for large investors who can afford to stay in profit thanks to the use of the economy of scale. This argument applies to both hardware and the purchase of electricity. Without forgetting the management costs of the structure itself and of the security systems to protect it.
Making small investments and “mining at home” is no longer profitable and will becoming less and less.
CREDITS
This article was originally written in Italian by Mattia Franzoni and translated in English by Stefania Stimolo for NovaMining.
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