Miners Deal with Risks of Unprofitability with this BTC prices
Written by Gabrijel Šerjak on April 20, 2018
As Bitcoin’s price remains stuck below $10,000, Wall Street players and others have turned their attention to how the price levels are causing potential financial risk for miners not breaking even if the prices continue this bear trend.
Miners receive rewards for successfully solving the complex mathematical equation that creates the next block in bitcoin blockchain. The process requires the use of high computing power, and the electricity costs for powering this equipment can be enormous.
Miners used to find it worth it when Bitcoin’s price was above $10,000 and especially when it was approaching the $20,000 high in December.
Once they solve the equation, the miner gets Bitcoin as a reward. So if the cost to create bitcoin exceeds the reward, the miner loses the incentive.
Most experts agree that the tipping point for most miners trying to profit from creating the crypto is around $8,000.
Morgan Stanley was the latest to join the topics, releasing a note on the subject to its clients on Thursday.
Morgan Stanley has attached a specific price tag at which mining may not be worth the while of the many who had once seen it as a hen that lays golden eggs.
The magic price range that observers of mining believe should remain on the radar screen is between $8,000 and $8,600. If Bitcoin’s price goes below $8,000 again and stays there, mining will likely be unprofitable for them.
In its note released by Morgan Stanley Wednesday, equity analyst Charlie Chan reportedly said:
“We estimate the break-even point for big mining pools should be US$8,600, even if we assume a very low electricity cost (US$0.03 kW/h).”
Bloomberg made similar findings. According to this report, if Bitcoin’s price drops below $8,000 again for an extended period, “there will likely be a swifter consolidation to industrial-scale mining.”
That could knock out the last guy-in-a-dorm-room operations and leave holders of the currency vulnerable to the dictates of the big miners.
Venture capitalist Bill Tai, said for Bloomberg ”Compared this year’s mining environment to last year’s.”
“It’s totally different this year than last year. The bitcoin mining industry was this mysterious dark cottage industry, and it’s about to grow up and about to have elements of institutional scalability at all levels.”