BITCOIN MINERS MIGHT BE QUITTING SOON.

BITCOIN MINERS MIGHT BE QUITTING SOON.

By Franklinlee | All-things-Crypto | 25 Mar 2020





Everyone knows that Bitcoin still runs a Proof-of-Work (PoW) model where miners are rewarded for using computational powers to perform complex calculations to mine each new block of Bitcoin. Their reward for this power draining job is BTC coins. This job however has very high operating costs as the equipments used have to be able to withstand hell and these equipments need to be maintained. The high cost of mining has driven away so many retail miners, and now we have only big companies ready to invest millions in starting a mining farm. But thereis however a catch to mining. The price of Bitcoin has to be higher than the operating costs otherwise the miners would not make any profit and they would be running at a loss(trust me it's all about profit) and also they need this profit to ensure the smooth operation of the network.




 

 

 

And so when Bitcoin starts to trade in the $3,000s and $4,000s like it did a while back, you know that these miners are running at a loss. This is because with the current costs of production, the cost of mining is estimated to be around the range of $4,800 to $8,000. So if the price of Bitcoin remains in the $6,000s, these miners are still running the network at a loss. And if they keep running at a loss more and more of them will keep locking up shop and closing operations.




 

 

 

And that's not all, the coming halving might make matters worse. Many expect the halving to have a bullish effect on the price. If this goes accordingly, it is expected that the demand for Bitcoin will rise which means more work for the miners. The increased difficulty in mining will also not help matters, but there is the biggest of all problems with the halving. The remuneration the miners receive will be cut in half and that can have a deadly impact for most miners if the prices remain as they are right now. Let's me break it down. Let's look at it this way, two months from now (that's May after the halving), the cost of production and maintenance of equipments will double and as a result, the operating costs price range will jump from the $4,800 to $8,000 range to between $ 9,600 and $ 16,000. I fear that if prices don't pick up, we might see more miners throwing in the towel and leaving, your guess is as good as mine on what they'll do.



Franklinlee
Franklinlee

Crypto enthusiast, collector, money lover.


All-things-Crypto
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