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Will Crypto Miners Break a Profit in 2020?

Can retail bitcoin mining on a smaller-scale continue to be profitable? Or is the gold rush era already over? | Source: Photo by Lars Hagberg / AFP

  • Bitcoin mining rewards’s next halving event is in May 2020.

  • A typical boom-or-bust cycle comes around the halving period.

  • It’s increasingly elusive for small scale and solo mining operations to sustain profits.

Bitcoin’s mining rewards halving, which is expected to occur in May 2020, has long monopolized discussions about the digital asset’s valuation and the profitability of cryptocurrency mining.

The first halving took place on November 28, 2012, with a price of $12.50. The second halving took place on July 9, 2016, with a price of $650. Now that many institutional investors have entered the crypto market, it will be exciting to observe how this impacts the 2020 halving and the upcoming event will possibly explain whether the previous Bitcoin price increases have been caused by the block reward halving, or if they were merely a coincidence.

Miners Profit

The upcoming halving event will see block rewards for Bitcoin miners reduced from 12.5 BTC for every block mined to 6.25 BTC after the halving, meaning 50% fewer bitcoins will be generated every 10 minutes. This will also affect the supply of new coins that will come into circulation.

Crypto mining profitability is one of the topics to be discussed at the upcoming World Digital Mining Summit in Frankfurt. CoinDesk reports that more than 1,000 attendees with an audience of miner manufacturers, experienced miners, mining farm owners, mining pools, energy suppliers, OTC traders, institutional investors, turnkey solution providers, blockchain organizations, fintech companies, will participate in a debate over the issue.

Jihan Wu, co-founder and ex-CEO of Bitmain, has been pessimistic about a potential price surge post halving.

Wu said:

Maybe people speculate too much before the halving, and then you can’t sell the good news anymore. Maybe, this time a bullish cycle is not coming yet. During the first and second halving, people didn’t know what to expect, and during the second halving, the scaling debate complicated the situation. Now people are expecting it.

On the other side, analysts at crypto-community platform Ethereum Express argue that crypto mining will return to profitability in 2020. The researchers also found that the ​global crypto mining market is growing at a compound annual growth rate of 29.9 percent​. The market was valued at $611 million in 2016, $8.9 billion in 2019 and ​is expected to reach $11.56 billion in 2020, followed by ​$42.76 billion in 2025.

When asked about the current mining situation and the associated challenges, ​Ethereum Express founder​ Vlad Miller said:

Even though the mining industry is investment-attractive and plays an important role in maintaining the health of blockchains, there are still several barriers in this area that cause inconveniences for most ordinary users. However, mining will regain its leading position in the cryptocurrency industry since the main benefit of mining is the ability to eliminate the monopoly on data by corporations who own massive data processing facilities.

Furthermore, analyzing Bitcoin hashrate data shows that the computing power dedicated to the network has not been affected by the sudden price drop the digital asset experienced on Nov. 21. In fact, the hashrate allocation peaked to a second all-time high.

Reduced Profitability

Reduced Profitability And Further Consolidation?

Block reward halving has been listed as one of the most important and expected events for miners as well. With the reward being reduced, profitability will be even further scrutinized, at least in the short term.

It’s expected that ASICS will no longer be profitable for their owners. According to Genesis Mining CEO Marco Streng, the Antminer S9, which has been the most popular ASIC model manufactured by Bitmain, has exhausted its productivity limit and “a lot of miners are running on a margin of profit”. Read More...