Bitcoin Mining Profitability Starts Falling After Stellar Year: Research

The end of 2021′s crypto mining gold rush may have just started.

AccessTimeIconDec 22, 2021 at 2:48 p.m. UTC
Updated May 11, 2023 at 7:17 p.m. UTC

The profitability of mining bitcoin has been slipping since November after a very profitable few months, Arcane Research said Wednesday in its monthly report.

  • In the month following China’s crackdown on miners in May, the bitcoin hashrate – a measure of computing power on the network – almost halved, data from mining pool BTC.com shows. With less competition from Chinese miners and soaring bitcoin prices, the remaining miners saw returns steadily grow until November, Arcane’s data show.
  • Galaxy Digital’s head of mining Amanda Fabiano compared the period to a “gold rush” in an inteview with CoinDesk.
  • But between Nov. 9 and Dec. 22, cash flows from bitcoin mining using Bitmain’s Antminer S19 have decreased by 36%, Jaran Mellerud, a researcher at Norway-based Arcane, told CoinDesk. For the S9 they’ve dropped 50%, he said. Mellerud attributed the slide to “a 28% drop in the bitcoin price over the same period, coupled with a 12% increase in [mining] difficulty.”
  • The profitability of mining using S19s has fallen to levels last seen in July, according to Arcane’s data.
  • Mining difficulty has been increasing since the end of July, data from bitcoin explorer Blockchain.com show, as displaced Chinese miners found new locations for their operations and new investments came on line, particularly in North America.
  • The difficulty of mining a bitcoin block automatically adjusts based on the hashrate to keep the time necessary to mine a block stable.
  • The biggest publicly traded miners “have extremely many ASICs [application-specific integrated circuits] scheduled for delivery in 2022,” Mellerud said. Given these deliveries and the fact that Chinese miners are still plugging back in, the hashrate will likely continue to increase into next year, miners told CoinDesk.
  • That means the “super profits” that we saw in 2021 “will continue falling in the first months of 2022,” Mellerud said.
  • Some of the world’s biggest mining firms echoed Mellerud’s predictions in interviews with CoinDesk over the past few weeks. Most expect the hashrate to grow significantly and even double in the next year as more machines are deployed, such that the difficulty of mining will rise, and profit margins will narrow.
  • But profitability ultimately depends on the price of bitcoin, Mellerud said. If it “increases faster than all the new hashrate coming online in 2022, we might see periods in 2022 with similar super profits as in 2021,” he said.
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    Eliza Gkritsi

    Eliza Gkritsi is a CoinDesk contributor focused on the intersection of crypto and AI.