Bitcoin Mining Profitability Declines While Revenue Increases

During the last couple of years, the bitcoin mining market has suffered several changes in terms of its popularity, profitability, difficulty and revenue. Now, a recent study showcases that in 2018, compared to 2017, the profitability of bitcoin mining has fallen, despite an increase in revenue for miners.

So, how is this possible? The last year has brought along a considerable increase in the network hashrate. During the last year, it has doubled, thus making mining more difficult and increasing energy consumption. This means that miners are forced to pay more for electricity usage, hence drastically reducing mining profitability.

Apart from this, one of the other factors influencing this decline is the fall of the bitcoin price, which is now lower than 60% when compared to last year. This aspect alongside lower liquidity levels are not only influencing the coin economics, but mining as well.

An interesting aspect worth pointing out is that by the end of September, the hashrate climb has tapered a bit. The reasoning behind this may be linked to small miners pulling out of the network, due to the lack of profit. This creates a gap, which has not yet been filled by large mining companies that are looking to benefit from this hashrate deficit.

For instance, two cloud mining platforms have already announced changes to their services. With this in mind, Hashflare recently announced that they are terminating their bitcoin mining contract, because of declining profitability rates. Genesis Mining, on the other hand, shut down its low-tier bitcoin mining contract citing similar reasons. However, they still offer a premium package, hence advising users to upgrade.

Due to the nature of mining cryptocurrencies, when small miners decide to exit the market, large companies profit off the deficit. They do so by upping their operations, and further consolidating their share of the mining market. Despite this aspect, on a theoretical level, roughly 54,000 BTC can still be mined every month, so there’s enough room on the market. Since mining bitcoin now requires a large investment in purchasing powerful hardware because of the high hashrate, many are turning to other digital currencies, which are more profitable.

Mining represents a key process for the well-being of bitcoin, and just like the digital currency, it needs to stay distributed. This means that it’s best for the network if there are millions of small-scale miners, rather than several companies monopolizing the mining market.