Last week the price of Bitcoin dropped from $58,000 to $48,000 but it doesn’t look like it demotivated anyone from deploying more miners. Based on the current estimates, the bitcoin mining difficulty will increase significantly in 5 days from now. This will cause a short-term hit on profitability of all miners operations.
Difficulty and price effect on mining profitability
Bitcoin price and mining difficulty are the 2 most important factors determining the profitability of mining operations. Mining difficulty adjusts every two weeks, and it depends on total hash-rate deployed to the network. If the difficulty increases, it means you will get less BTC from the same miner as you did before the increase. As a real world example – I am getting around 0.00216 BTC each day with my 4 x S19 95 TH miners connected to ViaBTC pool.
At $58,000 per BTC that would be a revenue of $125 per day. That is before the BTC price drop that just happened.
At $48,000 per BTC the daily revenue drops to $103, assuming not changes in difficulty.
Difficulty changes projection
In any standard rational industry, you would expect the production to decline with the decrease in price. Most companies are focused on maximizing their margins and increasing their stock price. Bitcoin mining however is not even close to rational.
On November 30th, 3 days before the Bitcoin sell off, the network has started to see rapid increase in hash rate.
And the increase has been going on since then. This means that more and more ASIC miners are being deployed to the network, mining blocks faster. The consequence is that the difficulty is going to increase next time it resets on December 11th 2021.
This is my favorite mining difficulty estimator out there. Screenshot below
Here is what some of these line items mean
Current Pace: This describes how many blocks should be mined at this point of time if the network hash rate was the same as during the last period. So at the time I took the screenshot, 1224 blocks were expected to be mined, but 1307 were actually mined already. This means that we mined almost 7% more blocks that expected.
Next Difficulty Change: The field is estimating the next difficulty change. I believe it is some kind of confidence interval from the current pace field.
Next Difficulty: It is the actual estimated difficulty number after the next change
Next Retarget: Estimate when will the next difficulty change take place.
It looks like that even thought the Bitcoin price dropped by $10,000, the mining difficulty will increase by around 6%. This means that miners will get 6% less Bitcoins for their mining efforts.
For me personally I can expect to drop my daily BTC production in ViaBTC to drop from 0.00216 to 0.00203. At price of $48,000 per one BTC this is daily revenues of $97.50.
So sum it up for 4 x 95 TH miners:
- A week ago, I was mining 0.00216 BTC per day worth $125
- 3 days ago, I was mining 0.00216 BTC per day worth $103
- 5 days from now I will be mining 0.00203 BTC per day worth $97. That is under the condition that Bitcoin price will remain at around $48,000