Profits Plunge With Prices as Bitcoin Mining Rigs Go Dark

Back in the days of the Wild West, gold prices would dictate the profitability of prospecting and mining. Around 150 years later not much has changed with regards to the economics of mining, however the commodity is a little different now.

Flagship Mining Rigs No Longer Profitable

Bitcoin has had its roughest week this year with prices tumbling almost 30% in just over a week. From a seemingly stable level at over $ 6,000 held for several months, BTC plunged to below $ 4,300 in a matter of days. The naysayers were rubbing their hands with glee leaving the hodlers feeling hungover.

Holders of cryptocurrencies are not the only ones in pain right now, especially if they need to liquidate, as miners are also suffering while profits dwindle along with prices. In a few short years Bitcoin mining has evolved from a bedroom activity for geeks on a gaming PC to a multi-billion dollar industry using dedicated computer machinery.

According to the SCMP at least four mining machines are no longer profitable to operate consuming power at a rate of 6 cents per kilowatt-hour (kWh). The estimates come from one of China’s largest mining pools, F2Pool. It has suggested that the following units are no longer profitable to run; Antminer S7 and Antminer S9 from Bitmain Technologies and Canaan Creative’s AvalonMiner 741.

The two Beijing based companies are the world’s leading suppliers of mining rigs. Both Bitmain and Canaan, along with a third supplier, Ebang International, have filed for multi-million dollar IPOs in Hong Kong. Prospects are not looking good now for the mining monopolies as crypto markets shrunk by a third last week alone. Canaan has already let is IPO application lapse.

The casualty list is increasing according to the report with Hong Kong based mining platform Suanlitou suspending contract based mining on the S9. The company admitted it was unable to cover management and electricity fees incurred by use of those machines for a 10-day period this month.

Mining factories across China are following suit with some already shutting down as many as 20,000 rigs due to power consumption and profitability issues. Others are seeing opportunity and buying up lower priced Antminers to sell on in countries where electricity is cheaper, or wait out the crypto winter.

The crypto Twittersphere has over-reacted as usual with images such as this circulating, whereas these were in fact the aftermath of the Sichuan flooding in July as reported by Trustnodes.

Many expect the bear market to extend well into next year so it may be a while before the high powered mining rigs can start whirring again.

Image from Shutterstock

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Technology – NewsBTC

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