Predicting the Bitcoin future

Bitcoin mining profitability vs. hash rate

George Basiladze
Bitcoin image via Shutterstock

Given the peaks and troughs of the Bitcoin world, it’s tough to stay optimistic about making money with mining. But is it possible to look into the crystal ball of hash rates, changing equipment and ASIC technology to see the future of mining profitability?

The world of Bitcoin mining is a tumultuous place of late and depending who you ask the mining ‘game’ is either doomed or remains a safe bet. What’s certain is that the climate is very different to that of the period of ‘free money’ that existed two years back. Long gone are the days of mining at home and graphics card based setups have given way to Application-Specific Integrated Circuits or ASIC’s, even cloud-mining services are feeling difficulties of late, with pausing its cloud mining service back in January.

The mining hash rate had previously been growing rapidly as it ‘caught up’ with the Bitcoin price. The result of this was mining becoming a highly profitable and attractive investment, which lead many to invest in mining-focussed machines. The hash rate continued to grow notably throughout 2014, but with the rate of growth dropping off. 2015 has seen this trend towards a plateau continue, with the hash rate floating fairly consistently around the 350,000,000 GH/s rate.

Bitcoin mining, due to lower exchange prices and a more developed network, now requires incredibly efficient, powerful equipment just to be profitable; Gone are the days of mining from home with GPU’s. Further developments in ASIC technology is likely the only beacon of light that has the potential to bring about increases in hash rate and a return to profitability without notable price surges. Further stagnated growth would likely see more significant changes to the mining landscape, with mining equipment manufacturers limiting or even ceasing retail of units and instead focussing efforts on their own equipment to increase capabilities across their mining facilities.

We are yet to see any significant increase in hash rate this year, despite promised improvements in energy efficiency; this could be due in part to mining companies taking their time to replace older equipment with the most state of the art ASIC solutions. It appears that some leading mining organisations are yet to replace their equipment, this can seen by the fact that some notable companies’ share of the total hash rate has increased whilst others have decreased. This leads many to anticipate a boost in hash rate as further large mining organisations bring next generation equipment online.

The future of Bitcoin mining profitability

Blocktrail’s “Pool Distribution” shows quite clearly that Bitfury has grown significantly over the last 6 months, as has AntPool’s capacity. This is a likely indication that these two mining organisations have been introducing new equipment. Many estimate that the total hash rate is set to rise again as new equipment is deployed across the board and new ASIC developments are initiated, with some believing the total network hash rate could reach over 700,000,000 GH/s.

Electricity costs will continue to be an important factor for miners to consider, but due to the nature of the mining landscape nowadays this is essentially just an operating cost factored into a sizeable business. It is important to remember that development is continuous in the field of ASIC technology and the most exciting new systems can take a long time to go from design to production and even longer before they can takeover as the main systems in large mining facilities.

Despite all these concerns, many are still optimistic for a future of profitable mining with Bitcoin; Max Keiser’s Bitcoin Capital Fund on the BanktotheFuture platform is offering a way for less technically minded investors to speculate on Bitcoin and they say a significant amount of the investment funds are destined to go towards mining. Ultimately there are a great deal of different factors that will decide the future of Bitcoin mining and its profitability. If innovation can continue with the development of ASIC technology and extremely efficient systems for powering the hardware, then perhaps we will see notable increases in total network hash rate soon, but as is often the case with Bitcoin nobody can know for sure!

George Basiladze
George is a finance guy with an in-depth knowledge of financial systems. Together with Dmitry they designed the concept of Cryptopay in May 2013 and started developing the system.

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