The following content is excerpted from the news release of Block One Capital Inc. dated September 6, 2018 and the research paper "A simple model of bitcoin mining" by Dr. Pratheev Sreetharan and Dr. Sivakumar Arumugam dated August 29, 2018.
Bitcoin Mining Sector
Dr. Pratheev Sreetharan (PhD Harvard University) and Dr. Sivakumar Arumugam (PhD Columbia University) have published a revealing analysis of the bitcoin mining sector utilizing publicly available global hash rate information.
Their research paper highlights the following realities of Bitcoin mining:
- As more and more new Bitcoin miners come on line, the rapid rise in global hash rate rates is leading to a rapid fall in the number of expected Bitcoins to mined by mining hardware.
- Profitability of mining machines is falling quickly over time.
- At an exchange rate of $10,000 per Bitcoin, a miner operating with an average cost structure will be unable to achieve profitably within a few months.
- Mining hardware is most profitable in its first days of operations.
- Delays in the deployment of mining equipment has a huge impact on revenue generation.
- Investing in new mining equipment currently will likely not produce very good future returns.
Discussion
Projecting hashrate trends of the past year into the future paints a grim picture for many bitcoin mining operations. Mining profitability is caught between an exponentially increasing hashrate and a bear market in BTC/USD. Under
this economic pressure it is difficult to explain continued increases in global hashrate, whether it be long planning cycles for capital spending, unique advantages enjoyed by specific mining operations, or some other factor. Current trends make it extremely difficult for the typical mining operation to invest in new mining equipment and expect positive returns.
Click here to view the research paper "A simple model of bitcoin mining".
