‘ASIC Financing’ Is Driving Down Bitcoin Mining Profitability

  • Bitcoin mining profitability is in the basement, seeing all-time lows in 2020.
  • Conversely, Bitcoin’s hashrate has surged throughout 2020, propelled in part by mining farms financing new hardware to boost their operations.
  • Bitcoin’s hashrate has taken a dip as China’s wet season comes to an end, but mining professionals predict this will only be temporary, and it has only improved profit margins so much.

Bitcoin mining profits have been rock bottom in 2020.

For much of the year, the cryptocurrency has been less profitable to mine than ever. And that’s because Bitcoin’s collective hashrate – or how much computing power is pulsing through the network – has surged to consecutive all-time highs this year.

Read more: How Bitcoin Mining Works

According to North American Bitcoin mining company Luxor’s hashprice index, miners are extracting $0.096 for every terahash they produce (before the recent price spike, it was lower still at roughly $0.08). This time three years ago, miners could expect to make roughly $1.40. Their revenue in October of 2019, though several magnitudes less than what they were raking in during 2017’s market mania, was still double today’s cash flows at $0.16.

Coming into 2020, miners were producing approximately 90 exahashes a second (or 83,000,000,000,000,000,000 cryptographic numbers a second in an effort to generate new blocks). Now, they are producing roughly 124 EH/s, after hitting an all time high of 157 EH/s in mid-October.

Bitcoin mining is a resource war of attrition, so naturally, revenue margins are dwindling in a year when Bitcoin’s hashrate is exploding. And ASIC financing could largely be to blame.

The practice, whereby big operations can take out loans to bulk-order newer generation hardware, floods the network with fresh hashrate. The surge in hashrate has meant more competition than ever for the digital gold rush –  and with fewer bits to go around, small-time miners are having trouble keeping up.

Bitcoin’s hashrate…

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