To Mine or Not to Mine Some BTC ?

in LeoFinance2 years ago

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That is the question that is mostly in the minds of people when BTC runs the race to beat its previous highs and not the question asked during a bear run.
Then why ask this question now ?
Read on to find out. You may be surprised to see the numbers.

There was a time when people mined for coal. However those seeking more wealth started mining diamonds, silver and gold.

Talking about Gold

I am more inclined to look for digital gold aka Bitcoin.
I guess for so many people in the crypto space digital gold means Bitcoin and why not it seems to me more scarce and a better store of money than physical gold.
Well that was the premise.
Though that is a contentious title for now specially in this bear market where Bitcoin prices seems to be doing everything except proving to be a safe haven.

That being said it has still not lost its sheen completely. Slowly but surly it has won hearts and use cases over time.

The cost of mining a BTC

Not so long ago before the start of June 2022 it costed $24000 to mine 1 BTC
That being said one might thing that BTC mining is no longer profitable and the miners may be sufering a huge loss.
However the data from June shows that the cost of mining 1 BTC is around $13000.

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This is the information coming from a trusted source working at JP Morgan.
The information comes from JPMorgan strategists led by Nikolaos Panigirtzoglou who wrote that the change is consistent with miners’ efforts to protect their profitability by deploying more efficient mining rigs.

If this is the case then if the price of BTC stays stable at $20000 then the miners can make a $7000 profit per BTC they mine.

Back of the envelope calculation

Some simple back of the envelope calculation shows that the cost price = $13000
selling price = $20000
Profit = $7000

Looks like BTC mining is pretty profitable again

Looking at it from the cost price of 13000 this is (7000/13000) * 100 = 53.84 % above the cost price.

It may be noted that this calculation is taking into account the cost price stays what it is and the selling price is at the price that BTC is currently hovering about.

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Should I be looking to get a Bitcoin miner ?

This cannot be answered with utmost certainty as the cost of mining depends upon the cost of electricity the cost of mining rigs in your area among-st other things such as do you have the risk appetite to stomach any future losses of BTC prices crashed ?
or if the govt. puts a high tax on BTC mining in your area ?

How could this play out ?

This should reduce the selling pressure on miners to recover their cost of mining and this hopefully support the BTC pricing on the other side it could also cause some sell off from the miners who may be sitting on their BTC stash and may think of this as the opportunity to recover some fiat investment.
If this news triggers a new frenzy to buy more advanced hardware then we may see a new buying frenzy for more cutting edge mining rigs which have seen some mellowed down demand in this crypto winter.

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Good questions. I wonder what is the situation with ETH mining nowadays?

Posted Using LeoFinance Beta

With ETH 2.0 on the horizon most miners would be switching fields.

Oh yeah, since it's changing from POW to POS.