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Unprofitable Mining. How Bitcoin Price Decrease Affected Mining Future

Vitaliy Bednarskiy

On November 25, 2018 Bitcoin price has hit another rock bottom reaching $3,874 per one coin. Thus the most popular cryptocurrency was back to its August 2017 indexes. Despite of the fact that next day the price was correlated to $4,016 the cryptocurrency community predicts further decline expecting the decrease under psychological threshold of 3K.

Taking into account that since November 13 till November 25 Bitcoin price has decreased from $6,350 to $3,874 losing almost 40% of its price such volatility is regarded as a serious threat for miners. Bitcoin net cost depends on the particular country being affected by the following factors:
• electricity tariffs;
• equipment cost;
• national policy (e.g. taxing system).

Where Bitcoin mining is the most profitable?

In 2018 International Business Times has published research concerning evaluating of Bitcoin net cost in 115 countries. In Venezuela mining tends to be the most profitable. One Bitcoin net cost is only 531 dollars while in South Korea it exceeds $26,000.

Canada, China, Iceland and the USA were regarded as countries where the most favorable conditions for miners had been created. Thus, the most powerful mining farms were located there: the most powerful farm in Liaoning having expected power of 100 MW, Hut 8 Mining Corp. in Vancouver - 86 MW, DMG Blockchain Solutions Inc. in the Canadian province British Columbia - 60 MW. Iceland is regarded as the world mining center hosting farms of numerous large companies.

After the decline of Bitcoin price mining in those countries became mostly unprofitable. According to the research, in Canada the net cost of Bitcoin mining is $3,965, in Iceland - $4,746 and in the USA - $4,758. China is the only country where Bitcoin mining is still profitable. Its net cost amounts there to $3,172.

Apart from Venezuela, top-5 world countries where mining is the most profitable are: Trinidad and Tobago ($1,190), Uzbekistan ($1,768), Ukraine ($1,852), Kuwait ($1,983) and Myanmar ($1,983). Moreover there are only 7 more countries where Bitcoin net cost is lower $3,000. They are: Armenia, Bangladesh, Belarus, Ethiopia, Georgia, Kazakhstan and Surinam.

New directions for miners

The experts predict further decreasing of Bitcoin price reaching $3,000. At the same time there are some more optimistic opinions. E.g. the financial analytic and Fundstrat Global Advisors co-founder Tom Lee believes that Bitcoin will reach $15,000 in the next year, but at the same time in May 2018 Lee expected Bitcoin price growth up to $22,000 by the end of 2018.

According to BlackBall agency experts, looking for new jurisdictions for cryptocurrencies mining is reasonable idea. Foremost national policy and future perspectives should be taken into account apart from Bitcoin net price.

In Bangladesh cryptocurrencies are regarded as illegal payment instruments and a person may be sentenced for up to 12 years imprisonment using them. In Kuwait Bitcoin is banned to be used for banks and any officials. In Ukraine political situation is unstable and the government is about to increase electricity tariffs. Venezuela is not regarded as an attractive jurisdiction for miners due to uncertain position of the government and possible prohibition of cryptocurrencies as a measure of maintaining national cryptocurrency El Petro.

Myanmar, Trinidad and Tobago and Uzbekistan tend to be favorable for Bitcoin mining but several problems still exist. Trinidad and Tobago is the South American island therefore difficulties with infrastructure and delivering appear. In Uzbekistan the government took the course towards blockchain technologies and mining but there is an editing risk of energy lack. Nuclear power station is expected to solve the problems but its construction will take 10 years.

Meanwhile Armenia and Georgia are becoming attractive directions for miners. One Bitcoin net cost is lower $3,000 and the governments are interested in attracting investors. The mining giant Bitfury has already established mining farm in Georgia and several Chinese companies have the same plans.

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