- At $0.03 per kWh, miners operating with S19 and S19 Pro machines are producing Bitcoin at a cost of $4,100 and $3,600 respectively
- Conditions are extremely lucrative for industrial miners with a significant share of hashrate operating at electricity prices of $0.03 and lower
- However, new entrants will face much higher hardware costs with S19 rigs currently selling at ~$76 to $79 per TH.
It’s undeniably been an extremely lucrative difficulty epoch for many Bitcoin miners. Despite difficulty rising by 10.79% at the last difficulty adjustment, some miners managed to operate at over 90% margins during the epoch.
Industrial Bitcoin Miners Produce Bitcoin At A Cost of $3,600 to $4,100
Estimates for the cost to mine show that miners operating with Antminer S19 currently have a breakeven electricity price of $0.23 per kWh. At an electricity rate of $0.03 per kWh, the current cost of mining one Bitcoin with an S19 stands at ~$4,100. With price trading at roughly $31,600, these miners are operating at 87% profit margins. These margins would have been even wider earlier in the month with price surpassing the $40k mark on two occasions.
The profit margins are even more lucrative for miners that are operating with the more powerful and efficient Antminer S19 Pro. At $0.03 per kWh, every Bitcoin is being produced at a cost of roughly $3,600. These miners are operating at 89% profit margins.
Are $0.03 electricity prices realistic? For a large share of the industrial mining operations, rates of $0.03 and lower are certainly feasible. HASHR8’s Bitcoin Mining Index research on the industry in Russia and Kazakhstan estimates that these regions collectively account for between 10.97% and 12.84% of the Bitcoin network hashrate. This is approximate to previous estimates by Cambridge Center for Alternative Finance which put the combined share at 13.07%. The Bitcoin Mining Index research indicates that miners in Russia and Kazakhstan are securing electricity prices as low as $0.02 per kWh without sacrificing uptime.
Such competitive electricity rates are also possible in regions that account for an even larger share of Bitcoin hashrate. Sichuanese miners are notorious for capturing electricity rates of $0.03 and lower during the region’s rainy season which takes place between roughly April and October each year. Outside of the rainy season, a significant share of Chinese hashrate transitions to Xinjiang, a dominantly coal-powered region, where rates of $0.03 are also possible. In North America, such competitive rates may be more uncommon but some facilities are certainly securing them. Nasdaq-listed Riot Blockchain transitioned a significant portion of their operations to Coinmint’s facility in Massena which has an electricity rate of $0.021 per kWh.
What about regions that account for a lower share of Bitcoin hashrate? At present, Nordic miners are benefitting from near-zero electricity rates. The wettest weather in roughly twenty years has resulted in a glut of hydropower generation and large scale mining facilities in the region, like Genesis Mining, are perfectly positioned to capitalize on it.
Bitcoin Mining Machine Costs Jump Over 200%
While these miners are undoubtedly reaping rewards in current conditions, new entrants need to be cautious about hardware prices. Many of the industrial miners mentioned above will have secured significant amounts of equipment at competitive hardware prices. For instance, Bitfarms and Hut8 were deploying Whatsminer M31S rigs in October and September respectively, long before hardware prices started rising. Significant purchase agreements were secured later in 2020 by exchange-listed companies like Marathon Patent Group and Riot Blockchain. In late December, Marathon Patent Group secured a record-breaking $170 million purchase agreement for 70,000 Antminer S19 rigs at a price of roughly $25.56 per TH. This is vastly more competitive than what new entrants are paying. With Antminer S19 rigs selling for $7200 to $7500 on the Compass platform, this represents a purchasing price of roughly $76 to $79 per TH, over three times what Marathon paid.
While Bitcoin miners may be experiencing lucrative conditions, those that pay high prices for hardware may depend on BTC prices remaining elevated and difficulty staying stagnant to ROI. While price movements are unpredictable, difficulty will undoubtedly not stay stagnant. An increase of roughly 1.8% is lined up for tomorrow while even greater increases are anticipated later in 2021. Marathon will start receiving its S19 shipments from July 2021 to December 2021 which will result in roughly 6.65 ExaHash of new hashrate coming online.