Many Bitcoin Miners Are at Risk of Turning Unprofitable (Bloomberg)

[Sandal_Hat]

https://www.bloomberg.com/news/articles/2018-04-18/bitcoin-miners-facing-a-shakeout-as-profitability-becomes-harder

Large miners Bitmain, Bitfury are seen increasing dominance
Dorm-room miners are becoming a relic of the Bitcoin bubble

Even with the price back above $8,000, many of the so-called miners that perform the complex calculations to generate the digital currency are at risk of turning unprofitable. If prices drop below that threshold again for an extended period, there will likely be a swifter consolidation to industrial-scale mining. That could knock out the last guy-in-a-dorm-room operations and leave holders of the currency vulnerable to the dictates of the big miners.

“It’s totally different this year than last year,” Silicon Valley venture capitalist Bill Tai said in an interview. “The bitcoin mining industry was this mysterious dark cottage industry, and it’s about to grow up and about to have elements of institutional scalability at all levels."


Smaller miners will drop out, and only five to 10 of the largest will survive and be profitable, said Tai, who serves as chairman of Hut 8 Mining Corp., the capital financing arm in North America for Amsterdam-based Bitfury Group Ltd., one of the biggest makers of crypto-mining equipment. When the price of Bitcoin approached $19,000 last year, Bitfury had to turn some customers away as $1.9 billion of orders streamed in, he said.

U can check out the rest of the article over at bloomberg. Looks like they finally picked it up.


I suggest dont go all in or too deep into mining guys. This bubble will burst and will end badly for some.

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[rifleman74]

All about future value.  Some people can afford to mine for losses, others can't.


Moderator's note: This post was edited by frodocooper to remove an unnecessary quote.

[Sandal_Hat]

All about future value.  Some people can afford to mine for losses, others can't.  

That makes no sense....

For example, if u will mine and make 20 dollar loss in a month. U should just buy bitcoin. The end result is that u get 20 dollars more bitcoin for the same amount of money u would have paid for electricity. U dont have to buy hardware either.

U will get $1000 of bitcoin from buying bitcoin, rather than get $980 bitcoin from mining, in this example.


Moderator's note: This post was edited by frodocooper to remove a nested quote.

[bill gator]

I suggest dont go all in or too deep into mining guys. This bubble will burst and will end badly for some

I'm very interested to hear some elaboration on this "bubble" that you're speaking of. Can you clue me in to what kind of bubble of going to burst and what kind of effect you think it will have directly? I understand you think the bubble bursting would be negative, but I don't see a bubble and I'm unsure how exactly that negativity would manifest itself.

Of course there's no reason to take out a second mortgage on the house, putting your family at risk and bet it all on a New batch of S9's. I think there is a reasonable buy-in for mining, but it becomes much more profitable with a single price-spike. Price volatility is the name of the game and we have a strong history of exploding past the expectations of every financial speculation. There are a lot of miners so the profit is scarce, but with the difficulty rising, new technology being introduced and the price dropping from the ATH there will be many that pull out of this market. That will make mining much more profitable for those that stick it out, and sticking it out will be very much worth it in the long-run. It always has been.

[Sandal_Hat]

I suggest dont go all in or too deep into mining guys. This bubble will burst and will end badly for some

I'm very interested to hear some elaboration on this "bubble" that you're speaking of. Can you clue me in to what kind of bubble of going to burst and what kind of effect you think it will have directly? I understand you think the bubble bursting would be negative, but I don't see a bubble and I'm unsure how exactly that negativity would manifest itself.

Of course there's no reason to take out a second mortgage on the house, putting your family at risk and bet it all on a New batch of S9's. I think there is a reasonable buy-in for mining, but it becomes much more profitable with a single price-spike. Price volatility is the name of the game and we have a strong history of exploding past the expectations of every financial speculation. There are a lot of miners so the profit is scarce, but with the difficulty rising, new technology being introduced and the price dropping from the ATH there will be many that pull out of this market. That will make mining much more profitable for those that stick it out, and sticking it out will be very much worth it in the long-run. It always has been.

Agreed. Watever u do, please use only money u can afford to lose.


Mining profitability has already dropped alot. lol if u havent notice. Previous batches of miners bought at higher prices will never ROI.

Price of bitcoin spike = difficulty spike up quickly. Why? Because u can get miners for cheap and delivered to your location in a week or two right now. It used to take 3 months. These miners can easily get cheaper because there are alot of asic production and not enough sales. Mining profitability, if spiked up due to price spike, will go down fast, due to fast mining difficulty increase.

I dont wish to re-explain the concept. I foresaw this 3 months ago. See here https://bitcointalk.org/index.php?topic=2781009.msg28443347#msg28443347  
It is just supply and demand.

Do note, profitability and miner prices were far higher back then. In December, an S9 miner cost like 5000-7000 USD on Ebay LOL


Whatever u do, dont use money u cant afford to lose and of course, never sell your house for this lol

[fanatic26]

The bubble already burst. 19k down to under 7k.

Making money in mining has moved away from the home users. You wont make your money back fast enough unless you are running over 100 miners. The days of milking a single unit for silly profits is over. Its now a quantity over quality game.

[rifleman74]

That makes no sense....

For example, if u will mine and make 20 dollar loss in a month. U should just buy bitcoin. The end result is that u get 20 dollars more bitcoin for the same amount of money u would have paid for electricity. U dont have to buy hardware either.

U will get $1000 of bitcoin from buying bitcoin, rather than get $980 bitcoin from mining, in this example.

Wait, so I spend MORE money to buy BTC instead of using the miners I already have?  Now if you said sell the miners and get into BTC, then you'd have something.  Otherwise you're just chasing the cheese and never reaching it.


Moderator's note: This post was edited by frodocooper to remove a nested quote.

[Sandal_Hat]

Wait, so I spend MORE money to buy BTC instead of using the miners I already have?  Now if you said sell the miners and get into BTC, then you'd have something.  Otherwise you're just chasing the cheese and never reaching it.  

Yes, spend money to buy BTC and switch off unprofitable miners is always better....

Example:
At the end of the month, u mine at a 50 dollar loss. U spent 1000 dollars on electricity. Hence, mining gives u 950 dollars of bitcoin only. U have lost 50 dollars.

It is BETTER if u just switch off miners and buy 10000 dollars of bitcoin instead. U would then have 1000 dollars of bitcoin. Mining would have given u 950 dollars of bitcoin. Your miner has attained doorstop status. I have 2 of those too haha. Mine is D3.


Moderator's note: This post was edited by frodocooper to remove nested quotes.

[Sandal_Hat]

The bubble already burst. 19k down to under 7k.

Making money in mining has moved away from the home users. You wont make your money back fast enough unless you are running over 100 miners. The days of milking a single unit for silly profits is over. Its now a quantity over quality game.

That is price burst, not mining profitability and overcapacity. But I agree with u that the war and pain has begun and big farms with rental/staff cost will probably need economies of scale to possibly survive. I also agree with bloomberg that even big farms can go down since they do have rental and staff cost. I would say a home miner with 6 cents electricity still has it better than a big farm with 6 cents electricity as home miners have no rental/staff cost.


Biggest problem - mining difficulty and overcapacity of asics:
For example, if bitcoin spiked 50% to 12,000 USD now. Asic manufacturers such as bitmain will take in 3 months worth of orders. They will deliver these orders in the next 3 months.
This is why mining profitability went from over 1000 USD a month for the S9 in Dec 2017 to about 200+ USD in January 2018.
Bitcoin price dropped 50% from 20k in Dec to 10k in January but profitability dropped by 70+%. It gets worse as more asics are delivered in Feb and March.
S9 were sold for 5000-7000 USD in December on Ebay but is worth under 1000 USD now.



Timing of miner purchase:
Even at 6 cents electricity, if bought an L3+ at 1500 USD in Dec 2017 to Feb 2018, it will take over 20 months to break even now.
That means never. U can get an L3+ now for about 400+ USD now and it was 200+ USD (with coupons), in the past.
If a more efficient machine comes out, it can unprofitable for L3+. There are big farms at the marketplace section wanting to sell a few thousand S9, at far higher prices than that for a new S9 now because they bought their stock at higher prices.
Hence, time your purchases properly.


Conclusion
So, be careful guys, even at cheap electricity, u CAN lose money.
In my local area now, the highest cost home miners are selling GPU and asics en masse. There is alot of pain there.
DO NOT spend money u cannot afford to lose. DONT take a loan to buy these things.
The lower cost home miners and commercial miners are not doing so well either, but surviving. Some of these asics will never break even though.
Do not depend on price spike upwards to mine more profitably because the moment it spikes up, millions of dollars of asics gets ordered and the first asic batch can be delivered in as fast as a week now.


Another problem as bloomberg pointed out is that if it consolidates into a few big miners, the prospect of a 51% attack becomes bigger. If such occur, bitcoin may be worthless. However, this still seems like a far off possibility for now.

[bill gator]

Agreed. Watever u do, please use only money u can afford to lose.

This rule goes for every investment or gamble you are thinking about. I would apply this universally throughout my life. It's never going to steer you wrong, unless you were going to score upon blind-luck and this is not something to realistically bet anything valuable on.

Previous batches of miners bought at higher prices will never ROI.

If you paid too much for a miner, I agree, you're screwed unless you continue mining and wait for a price spike or attempt to wait it out until it becomes more profitable, which won't happen because new technology will be introduced before that happens.

Do note, profitability and miner prices were far higher back then. In December, an S9 miner cost like 5000-7000 USD on Ebay LOL

I've just been buying 1080TIs for extremely cheap and leaving them mining altcoins. It has been extremely effective, only takes me a few months to ROI and so I'm a happy camper thus far. Overspending on the wrong hardware is the worst play in mining.

[A.Delaney]

I don’t see what it matters as far a farm size. If you have 1 miner that’s not profitable. It wouldn’t matter if you have 100 miners. If one isn’t profitable then 100 isn’t profitable. So huge farms have big overhead to factor into the price. If anything I would think they are more at risk of dying off than us smaller miners.

[munchies859]

I don’t see what it matters as far a farm size. If you have 1 miner that’s not profitable. It wouldn’t matter if you have 100 miners. If one isn’t profitable then 100 isn’t profitable. So huge farms have big overhead to factor into the price. If anything I would think they are more at risk of dying off than us smaller miners.

You're right, and a lot of people have a hard time grasping this it seems.  The only advantage that a larger operation might have is cheaper electricity.  However, that in and of itself is not impacted by the amount of miners in operation.  It's just that people with cheap electricity use that opportunity to run a lot of miners.  Large operations have significant overhead like rent and the cost of running an HVAC system.  If you do it in a house you already own in your basement that cools itself, that's as cheap as it gets.

[Thetaj]

Bro you back at this again?

Its been beaten to death. I will reiterate the point that an old-time miner made to me many years ago.

If you don't have cheap-free electricity: Don't mine.
If you want to get rich quick: Don't mine
If you love Bitcoin, want to help secure the network, AND also have cheap-free electricity: Mine

[rifleman74]

Yes, spend money to buy BTC and switch off unprofitable miners is always better....

Example:
At the end of the month, u mine at a 50 dollar loss. U spent 1000 dollars on electricity. Hence, mining gives u 950 dollars of bitcoin only. U have lost 50 dollars.

It is BETTER if u just switch off miners and buy 10000 dollars of bitcoin instead. U would then have 1000 dollars of bitcoin. Mining would have given u 950 dollars of bitcoin. Your miner has attained doorstop status. I have 2 of those too haha. Mine is D3.

Where would this magical $10k come from that I would use to buy BTC?   My miners are just fine.    YMMV


Moderator's note: This post was edited by frodocooper to remove nested quotes.

[A.Delaney]

Where would this magical $10k come from that I would use to buy BTC?   My miners are just fine.    YMMV

I think that was a typo. It should have been $1000 since that is about the price of a miner.


Moderator's note: This post was edited by frodocooper to remove nested quotes.