Amid the widespread collapse in the cryptocurrency market, bitcoin miners are shutting down operations en masse. Bitcoin mining was always a precarious position to take with a number of moving variables to account for, such as the price of electricity, initial hardware expenses, leasing costs, and the price of bitcoin, to name a few. Many mining farms were barely profitable or opened on the basis that the price would appreciate or at least remain stable, which has not been the case. One such mining company to close its doors is Giga Watt Inc.
Giga Watt Inc shuts down
On November 19th, the Washington-based mining company filed for bankruptcy due to the market decline. The company owes millions to investors and electricity firms in unpaid bills. Twenty unsecured creditors are owed in excess of USD 7 Million and total liabilities are estimated between USD 10 – 50 Million as per court documents. The assets of the company are worth less than USD 50,000. Giga Watt Inc raised over USD 22 Million in cryptocurrency for its ICO last year. The company is also being sued by investors for operating an unregistered securities offering.
Giga Watt is not the only firm to close shop. In Sweden, mining companies such as NGDC have simply left the region with millions in unpaid electricity bills. The vast majority of small-time miners have failed when trying to mine bitcoin, which is now heavily industrialized. Mining companies in China are also being investigated and shut down by regulatory authorities. According to research from Diar, bitcoin mining is starting to become unprofitable for most, and this became apparent in September.
Is Bitcoin mining still profitable – crunching the numbers
At current market prices, bitcoin mining is not profitable for most people. Assuming a cost of USD .12 per kilowatt hour, the average person with an Antminer S9i would lose USD 340 per year. This does not include the initial cost of the hardware or its depreciation.
However, bitcoin mining is still quite profitable for large mining companies. This is because, in many regions, the price of electricity runs under USD .03 per Kilowatt hour. Such regions include Iceland, China, and Canada. At these prices, mining farms are still turning a profit and they will have many ASIC miners. They can also take advantage of buying at scale and cheaper long-term leasing. There are online calculators which analyze all the variables in terms of whether or not a mining operation is profitable. But this can only provide a current, not a future, evaluation.
Bitcoin mining companies, especially Bitmain, has been outlandishly profitable, and they are still turning an enormous profit. Unfortunately, this type of heavy mining centralization is an unwanted side effect many recent cryptocurrencies are trying to deal with.
Digital Nomad with an interest in Zen and Blockchain technology.
Law graduate with 3 years experience as a consultant in the capital markets industry and 4 years experience freelancing on UpWork as a Creative Writer.