Crypto Market Commentary
19 March 2019
Doc's Daily Commentary
Doc’s Most Recent Trade School
“Hey, does anyone still mine with ASICs?” asked someone in the Omnia Discord the other day.
This got me thinking. Does anyone really still mine, other than the massive organizations with access to cheap power? I said 6 months ago that the home mining dream was dead, and I meant it. The ability to build a small mining operation in your basement and have it turn a profit within a few months is a dream that only lives on in small projects with enough liquidity to make it worthwhile.
True, there are some projects that are ASIC resistant, and the general trend of the crypto community has been to embrace alternative forms of consensus which don’t need massive mining operations, like Proof Of Stake.
Still, the allure of a “money printer” is too good to pass up.
So, let’s try to answer a seemingly simple question: is mining still relevant to the retail trader in 2019?
First, some context.
Bitcoin mining is a very dynamic industry with consistent updates to the hardware, software, pools, price and profitability. From traditional CPU and GPUs, mining investors have now moved toward ASIC miners. It’s a simple cost benefit analysis: ASICs smoke the CPU and GPU miners by providing enormous hash rates for the power consumed. Quite simply, they’re the best.
In early days, anybody could have mined Bitcoin using their average laptop or desktop computer.
Now, we have powerful and dedicated hardware commonly known as Application-Specific Integrated Circuit (ASIC) Miners.
Just for a thought, an average ASIC Miner has the power of about 700 GPUs!
So let’s begin. To do so, we must select a suitable ASIC mining rig. To aid in our selection, the Bitcoin Wiki provides a handy mining hardware comparison :
The Bitmain AntMiner S9 is a modern mining rig which offers a good hashrate for its power consumption.
It’s pretty much the cutting edge of mining tech so we’ll select it for our example.
The S9 is available for roughly $1800 up to $2400 from Amazon, or about $1365 from BitMain, shipping excluded. Power supply units will add another $120 or so to the price.
Next, we need to enter the S9’s specs and cost, as well as other info such as power cost and pool fees, into a suitable number-cruncher.
We can plug our metrics into a Bitcoin mining profitability calculator which automatically fills in the current BTC price, Difficulty and block reward info. Note that the Hardware Costs field does not seem to influence the final calculation.
Before getting too excited about your potential mining profits, let’s recalculate them using the average residential Power cost per kWh in the USA (~12.5c) and a typical pool fee of 1%.
The result is that, based on current prices, it would take over a year to pay off your miner.
This is a dangerous assumption! Bitcoin’s total hashrate – and thus its difficulty, has been consistently rising since the early years, sometimes jumping by double digit percentages within a month!
Therefore, any calculations should be regarded skeptically, as likely best-case scenarios.
You have to contend with the potential setbacks such as difficulty spikes, price crashes, equipment failures, power cuts, shipping delays, and more!
The average home miner will struggle to be profitable or recoup the cost of mining hardware and electricity, especially with the Bitcoin downward price trend.
Profitability is highly unlikely given the current circumstances.
The situation may improve in future once ASIC mining hardware innovation reaches the point of diminishing returns.
That, coupled with cheap, hopefully sustainable power solutions may once again make Bitcoin mining profitable to small individual miners around the world.
This would also greatly improve the decentralization of the Bitcoin network, hardening it against legislative risk.
So, hopefully it’s clear that over the next year we’ll hear more about the “halvening” and how people are flocking to mine Bitcoin in anticipation. Don’t be so easily fooled. Mining requires the seriousness of running a business, and the capital investment to match. Not to mention, it is not a hobbyist’s game anymore. It requires cutthroat execution and competition against huge mining farms.
It is not a money printer anymore.
An Update Regarding Our Portfolio
We are diligently working on providing you with our new RSC Managed Portfolio (V3.01) in the coming weeks. We will be posting iterative updates in the discord.
We intend on this portfolio being balanced between the Three Pillars of the Token Economy & Interchain:
Crypto, STOs, and DeFi projects.
We will also make a concerted effort to draw from community involvement and make this portfolio community driven, like our Portfolio call on yesterday’s Discord chat.
Thank you for your patience.
Here’s a sneak peek at the new portfolio:
Here’s our past portfolios for reference:
RSC Managed Portfolio (V2)
RSC Unmanaged Altcoin Portfolio (V2)
RSC Managed Portfolio (V1)