HomeBitcoin MiningNew Report Discusses Some of the Issues Associated with Bitcoin Mining

New Report Discusses Some of the Issues Associated with Bitcoin Mining

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At the time of writing, bitcoin is on something of a rebound. The currency has recently spiked back into the $7,100 range despite falling to $6,800 as early as last week, but one source says we should have “seen this coming.”

Bitcoin Is Moving on Up

According to new data regarding mining operations, the price of extracting a new bitcoin costs roughly $6,300. Thus, it’s unlikely that bitcoin will ever fall below that level. Just a few days ago, bitcoin came dangerously close to that point, but failed to fall further.

The data comes from a new report issued by Coin Shares, which explains:

Among our findings is an estimate that the current market average, all-in marginal cost of creation… is approximately $6,300. If our estimates are correct, this suggests that, at [then] current bitcoin prices ($7,300), the average miner is profitable.

Glen Goodman – author of “The Crypto Trader” – says that roughly a year ago, bitcoin fell below the $4,000 range, causing many miners to exit the business. However, those that stayed behind not only raked in a healthy profit but contributed to the life that now flows so freely throughout the industry.

He states:

Almost exactly a year ago, the price of bitcoin fell as low as $3,200 even though average bitcoin mining costs were about twice as high… What matters is not the average miners but the lowest cost miners, the ones who can do it most cheaply because they have access to cheap electricity and newer, more efficient mining equipment. Those miners can even scrape a profit at $3,900. If the bitcoin price fell below $3,900, I expect we’d see fireworks. Most miners would have to shut down operations, and many would be forced to sell their stocks of BTC, which would push the price down further, but in that situation, the bitcoin system automatically adjusts to make mining easier until miners feel it’s profitable to start working again.

One of the major problems surrounding the bitcoin mining arena is the fact that prices can change so drastically depending on where one is stationed. In China and Saudi Arabia, for example, the costs of extracting new coins are relatively cheap, at roughly $3,100 for each coin within these countries.

Prices are a little more expensive in Canada at roughly $4,000 per coin, but nothing compares to regions like Australia, where it can cost as much as $10,000 to extract a new bitcoin.

The Problems of Mining

A market analyst with international payments system Wirex claims:

On one hand, this is bad news for miners as it’s not a profitable enterprise anymore, but miners tend to hold a few BTC in reserve, so the increase in the cost of mining just means they will hold onto the coins they already have before mining new ones.

Nick Marinoff
Nick Marinoffhttps://www.livebitcoinnews.com/
Nick Marinoff is currently a lead news writer and editor for Money & Tech, a San Francisco-based broadcasting station that reports on all things digital currency-related. He has also written for a number of other online and print publications including Black Impact Magazine, EKT Interactive, Seal Beach USA and Benzinga.com, to name a few. He has recently published his first e-book "Take a 'Loan' Off Your Shoulders: 14 Simple Tricks for Graduating Debt Free" now available on Amazon. He is excited about the potential digital currency offers, particularly its ability to finance unbanked populations and bring nations together financially.

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