Is individual Bitcoin mining still profitable? Our analysis of average costs post-halving may bring disappointing news.
To figure out if mining Bitcoin for profit is worth it after the halving in 2024, we looked at a few important factors and conditions.
- Bitcoin price: The price of Bitcoin significantly influences Bitcoin mining profitability. It may undergo changes, but for this analysis, we consider the current market price as of Jan. 16, which is around $43,000.
- Mining hardware specifications:
- Model: Whatsminer M53S++, a popular choice among BTC miners.
- Hashrate: 320 TH/s, indicating the mining power of the equipment.
- Power consumption: 7,040 W (or 7.04 kW), a crucial factor in determining Bitcoin mining electricity cost.
- Purchase cost of miner: $6,400
- Electricity cost: A major recurring expense in BTC mining. We use the average rate in the U.S., which is 16.21 cents per kWh.
- Block reward: After Bitcoin halving in 2024, the block reward will be 3.125 BTC, half of the current reward, impacting the revenue from mining.
- Annual operational and maintenance cost: This may include repairs, climate control solutions, ensuring efficient connectivity to a rapid and dependable internet provider, and arranging to staff if you choose not to oversee it personally. For the sake of simplicity, let’s assume it to be 20% of total costs.
- Total network hashrate: Hashrate in 2024 may see a significant drop as smaller miners power down their rigs after the halving event. However, industry analysts project a potential surge in hashrate by the end of the year. We take an estimated 529 EH/s as of Jan. 16.
- Annual blocks mined: Bitcoin is designed to mine 144 blocks per day, which is equivalent to 52,560 blocks per year.
Part 1: Annual electricity cost calculation
Description Value Power consumption of miner (kW) (A) 7.04 kW Electricity cost per kWh (USD) (B) $0.1621 Hours in a day (C) 24 Days in a year (D) 365 Annual electricity cost (USD) (AxBxCxD) $9,996.77
Part 2: Annual Bitcoin mining revenue calculation
Description Value Total network hashrate (EH/s) (A) 700 EH/s Hashrate of miner (TH/s) (B) 320 TH/s Miner’s share of total network hashrate (C) = (A/B) 0.0000457% Total blocks per year (D) 52,704 (366 days) Miner’s blocks per year (E) = (CxD) 0.0241 Block reward (BTC) (F) 3.125 BTC Annual Bitcoin revenue (BTC) (G) = (ExF) 0.0753 BTC
Part 3: Total annual costs calculation
Description Value Annual electricity cost (USD) $9,996 Annual operational costs (USD) $3,279 Purchase cost of miner (USD) $6400 Total annual costs (USD) $19,675
Part 4: Net annual profit or loss calculation
Description Value Annual revenue (USD) (0.0753 BTC * $43,000) $3,237 Total annual costs (USD) $22,275 Net annual profit or loss (USD) $19,037
For simplicity’s sake, the calculation assumes the all-time high Bitcoin hashrate, accounting for likely future growth. Additionally, it assumes the mining operation begins after the next halving of the block reward, expected in April. The choice of a $43,000 Bitcoin price is completely arbitrary, merely reflecting the approximate price as of press time.
In this scenario, the operation results in a net annual loss of approximately $19,037
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Advantages of industrial miners over individuals
Over the years, BTC mining has evolved dramatically, favoring big miners over small ones.
One critical factor contributing to this shift is the early entry of industrial miners into Bitcoin mining. When Bitcoin’s value hovered around $500 or even $5,000, the cost of mining equipment was considerably lower, and the industry wasn’t as scrutinized for its environmental impact as it is today.
Moreover, industrial miners’ ability to participate in demand response programs sets them apart. Unlike traditional industries, BTC miners can rapidly adjust their energy usage, turning off operations when energy is scarce and expensive, which benefits both the grid and operational costs.
This flexibility is particularly profitable in areas like Texas, where miners have supported the grid by going offline during peak demand periods.
Access to cheap and sustainable energy sources further strengthens their position. Analysts suggest more than 50% of Bitcoin mining uses sustainable energy, including wind, solar, and hydropower, which are more cost-effective than fossil fuels.
This reduces operational costs and aligns with the growing importance of environmental sustainability in the industry.
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At the same time, the geographical flexibility of industrial miners allows them to set up operations in regions with favorable political climates and abundant green energy, such as Nordic countries and Canada. This is crucial, especially in light of regulatory changes like those seen in China and Iran.
Furthermore, industrial miners benefit from economies of scale, allowing them to reduce the cost per unit of Bitcoin mined.
Hence, as the Bitcoin mining industry continues to mature, these factors will likely become even more pronounced, marking the dominance of industrial miners in the field.
What to expect from Bitcoin mining in 2024?
In the above analysis of Bitcoin mining’s viability in 2024, we’ve employed realistic averages and assumptions for electricity and mining equipment costs.
However, it’s important to recognize that these factors can significantly vary, especially in large-scale mining operations. Unit economics shifts with the installation of numerous machines, altering profitability.
Geographical location is also crucial in mining profitability, with electricity costs being the primary expense.
For instance, in Iran, electricity costs are as low as 2 cents per kWh, far below the U.S. average. This disparity significantly impacts profitability, though it’s tempered by regulatory challenges, as seen in Iran’s crackdown on over 8,000 illegal mining facilities in May 2023.
Amid this, the SEC’s approval of spot Bitcoin ETFs introduces a new dynamic, potentially increasing Bitcoin’s demand and price, thus benefiting miners. Yet, the Bitcoin mining investment landscape is evolving. The Bitcoin halving in 2024 will reduce mining rewards, demanding more efficient operations. Optimizing operational efficiency and exploring alternative revenue streams become essential for those exploring opportunities to make money with Bitcoin mining.
Being a miner in 2024 demands strategically navigating these complexities. While ETFs could herald a bull market, the halving necessitates cost-effective and efficient mining practices.
