As with any production business, the profitability of bitcoin mining is dependent on input costs vs value of goods or services produced.
There are several different variables that effect bitcoin mining profitability.
This article is about mining profitability. To learn more about how bitcoin mining works check out: What is Bitcoin Mining, and How Does It Work?
Variables for Bitcoin Mining Profitability
1) Cost of electricity
2) Efficiency of the mining rigs being used (electricity used per hash generated)
3) Price of bitcoin
4) Current difficulty of mining
A mining farm with extremely efficient mining equipment and extremely cheap electricity can be extremely profitable. However, their profitably depends on more than just electricity cost, and efficiency.
Profitability also depends on two large variables that are outside of their control: the price of bitcoin, as well as the current difficulty adjustment.
Bitcoin Price vs. Difficulty Adjustment
As the price of bitcoin goes up, more miners are attracted onto the network. Increases in global hash power leads to an increase in the difficulty adjustment. An increase in the difficulty adjustment will decrease the amount of bitcoin a mining company is able to produce.
As the price and difficulty rises, a miners produces less coins, but the coins are more valuable, so the two variables largely offset each other. Profitability usually remains fairly consistent.
However, the price of bitcoin and the current difficulty adjustment are not always correlated. Sometimes extraneous factors (such as China banning cryptocurrency mining) can effect the difficulty adjustment much more than the price of bitcoin.
When China kicked all the miners out, it was a windfall for all other miners worldwide because there was a large downward adjustment in the bitcoin mining difficulty, while there was only a small decrease in the price of bitcoin.
The result was that non-chineese miners immediately became much more profitable.
Sample Mining Profitability
For this example, we’ll look at the profitability of operating (1) Antminer S19j Pro 100TH bitcoin mining ASIC unit. The S19 Pro is currently one of the best and most efficient bitcoin mining rigs available.
An Antminer S19j Pro 100TH uses 3050 watts of power, and produces 100 terahashs per second.
The average electricity cost in the United States is 10.42 cents per kilowatt-hour, so we’ll use that in this example. However, it is possible to find significantly cheaper electricity.
Using the current network hash rate of about 113,000,000,000 GH/s and the current price of bitcoin (around $50,000 in Sept 2021), your miner will be able to produce:
.02362 BTC/month with a profit of $887/month (electricity cost of $228)
or
.2874 BTC/year with a profit of $10,790/year (electricity cost of $2,784)
An Antminer S19j Pro costs somewhere around $12,000 (if you can find one). This means the expected payback period would be just over 1 year.
Buying A Bitcoin Miner vs Buying Bitcoin
If you’re considering buying a bitcoin miner, you should also consider just buying bitcoin in stead.
Mining rigs usually ship from China and its common for there to be several months between purchase, and delivery.
If you spend your investment money on a miner, and the price of bitcoin goes up substantially before you’re up and running – you would have been better off purchasing bitcoin instead.
When bitcoin price volatility is low for long periods of time, the bitcoin mining rig would be the more profitable choice.
Want to learn more about bitcoin? Check out all my other articles!