New research from Diar has revealed that while Bitcoin prices remain 40 percent higher than last year, and Bitcoin miners have achieved record revenues of $ 4.7 billion this year, a number of factors including increased competition and computing power have been combined to make Bitcoin mining less profitable than before. The report said that this created a situation that endangered larger mining operations with profits in the struggle for survival.
The Role of Equipment and Energy Costs
According to research, China remains one of the few countries to offer a retail energy pricing package that makes commercial sense for Bitcoin mining, with a midpoint cost of around $ 0.08 / kWH. Even so, rent, salaries, equipment, and other overhead costs can quickly make amateur mining companies go bankrupt.
All of this adds to the market situation that supports the survival of large mining pools such as those owned by Bitmain over smaller mining operators. Bitmain on how recently released data shows that it is, in fact, more dependent on sales of ASIC Antminer mining devices than anything else, with 95 percent of H1 2018 revenue coming from miners' sales.
The data also shows that Bitmain's mining strategy is directly related to the sales strategy for its mining unit. According to Diar, 11 Bitmain's mining facilities in China along with the facility to be opened soon in Tennesse, Texas and Washington State can see the position of the company itself as a swing producer controlling the significant portion of Bitcoin blockchain's hashrate with the ultimate goal of ensuring that mining remains profitable for all miners. When miners make money, they will be more likely to buy more mining equipment.
As a by-product of this, of course, Bitmain mining also remains profitable, which is very important for new operations in North America that are substantially more expensive to run than installations in China that have higher energy costs.
Giving a decision about the current condition of the Bitcoin mining market, the report said:
"It is unlikely that the recent reduction of the hash power to survive. With large mining operations with low electricity costs running anywhere between 50-60% of gross profit from Bitcoin revenue, the market has a lot of space left to grow and, the benefit to be squeezed. But Bitcoin mining, at least for now, and most likely in the future, moves to a larger player court with a deep bag. "
The full Diar report is available here.