Crypto Mining Becomes Unprofitable in Europe

So Far September has been a disastrous month for the mining community as the Ethereum blockchain was finally switched to the Proof-of-Stake (PoS) protocol. This has finally put an end to the expensive GPU mining where the Ethereum was a core coin to mine. After this switch GPU processor prices dropped by around 70% as the demand slumped to all-time lows.

More and more mining is becoming a specialised professional business for those companies that have relatively new and advanced hardware. Mining is also more profitable at times when energy costs are low. For such companies a breakeven price for the world’s major cryptocurrency, Bitcoin, is around $7,000-9,000 per coin. Surprisingly, the hashrate of the Bitcoin network is rising and is at 250 EH/s, still lower than a record 272 EH/s on September 4, but well above 121 EH/s a year ago. Bitcoin hashprices dropped to an all-time record of $0.07469 from $0.29991 a year ago and that is because leading miners are taking over the least effective miners.

The second reason for decreasing mining profitability is increasing energy prices. Although, they did somewhat stabilised in late September at €0.475 per Kw/h in Czech Republic (11.7 CZK) from almost a €1 per Kwh in late August, industrial electricity prices are relatively high even in Germany where 1 Kwh costs €0.31 or in Spain where it is at €0.13.

With Bitcoin prices aiming to reach $14,000 or even $10,000 this year, mining could become an exclusive business for professionals. Even mining pools would be less effective for individual members of the pool.

The second major cryptocurrency, Ethereum, was once a gold mine in this regard as it required much less efforts to claim the reward and the coin was quite expensive to bring significant profit. But everything changed on September 15 as the PoS algorithm was finally installed onto the Ethereum network. Some traders tried to switch over to the mining of other cryptocurrencies like Ergo ($2.64) and Ravecoin ($0.037), but these are not profitable after paying for electricity. The prices of these coins are also looking down, following Bitcoin. So, it might be risky to switch to them. Moreover, switching between minable coins will require time to consider its effectiveness and it may just be a waste of time.

All in all, mining is becoming a more complicated business on the bearish market. And this will unlikely change as major central banks continue with their monetary tightening across the globe, including recent actions by the European Central Bank. Risky assets like cryptocurrencies may decline further with mostly infrastructure projects that could recover when the appetite for risk is restored. Such infrastructure projects like Solana, Avalanche, and Flow may become leaders of the next upcycle. But these are not minable coins.

According to coinswarz.com coins like Monero, Litecoin, zCash, Beam, Dash, and, certainly, Bitcoin, are the most wanted minable currencies by their hashrate. Indeed, these are very popular currencies and could be considered to be mined. The simplest to mine is Monero as it could be mined via browser extensions but is very vulnerable to hacker attacks. CPU minable cryptocurrencies are more likely to bring lower returns. Others would require additional processing capacities, or GPUs for mining. Professional mining or mining of some cryptocurrencies that are based on the Bitcoin blockchain would require ASIC mining chips that would be of extra high costs. 

But can money really be made on cryptos without mining them? The answer is yes. Even with the new upgraded Ethereum that is now running on PoS protocol, transactions can be validated even without advanced hardware to get the reward. But it would be much smaller amount per transaction comparing to when the PoW algorithm was used, although the number of transactions per second have increased dramatically.

The more common opinion on how to work with cryptos is to invest in infrastructure native tokens that may become stars of the next upside cycle. Such tokens as Flow, which is working with desentalised gaming, is quite promising as it may bring up to 1600% from the current values once it recovers to its peak prices. Another example of promising token is the Polkadot that is an infrastructure platform with parachains networks (specialised blockchains) that are united in a single ecosystem. This project may become the next Ethereum and run at a much higher processing speed. These are long term investment examples. 

But investors may also try to learn how to trade cryptos to gain maximum profit from the market. Although this kind of trading is considered to be risky as well as tricky, and also requires expertise and understanding, crypto trading is usually mean short-term operations.

Iván Marchena, The Head of Analytical Department Metadoro 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.