Thomas Lee, a co-founder of the Fundstrat cryptocurrency advisory firm, has stated that cryptocurrency miners can still use Bitmain’s older generation Antminer S9 ASIC to profitably mine Bitcoin.
According to Lee, the total cost of mining one BTC would come to around $7,300 to $8,500 if one were to assume power costs at $0.06/KWh. Lee added that both old and new generation mining rigs continue to be profitable at Bitcoin’s current price level.
Latest mining report from our quant team. Using S9 and $0.06/kWh, cash breakeven for $BTC mining is $7.3K vs price of ~$10k. Miners profitable and apparently some older rigs are also profitable.
– Their thesis remains if miners making $$$, they are BTC sellers to fund capex https://t.co/TZaEKHehRy
— Thomas Lee (@fundstrat) September 9, 2019
Mining Rigs Still Profitable at Current Bitcoin Price
Alex Kern, a research analyst at Fundstrat Global Advisors, said that at the current BTC price level of $10,000, older generation mining rigs such as the Antminer S9 and WhatsMiner M10 continue to be profitable. He added that it would cost miners using these machines approximately $8,528 and $7,351 respectively to mine a single BTC.
Lee also commented on the thesis of the report which says that to fund their capital expenses, miners are selling their cryptocurrency. Among the mining rigs that were compared, Innosilicon T3 57T recorded the best performance and efficiency, with the cost of $5,126 for mining a single BTC. However, with the cost of the T3 57T mining rig being over $2,500, it would still lead to a negative return, since miners have to cover the cost of their hardware and factor return on investment (ROI) into their calculations.
Sustainability of Bitcoin Mining
Bitcoin mining has a consistently high energy requirement. Since renewables are an intermittent source of energy, electricity is often sourced from non-renewable sources such as coal-based plants. Higher power draw from Bitcoin mining farms could, therefore, incentivize the construction or continued usage of coal-based power plants.
According to Digiconomist,
“A Bitcoin ASIC miner will, once turned on, not be switched off until it either breaks down or becomes unable to mine Bitcoin at a profit.”
The report also predicts that miners will have to spend over 60 percent of their revenue on electricity. It also considers the investment in mining hardware as a sunk cost and notes that miners will continue to run their machines until electricity costs exceed the amount of mined cryptocurrency. The report has, on more than one occasion, raised questions on the sustainability of mining in the long term, especially when one considers that Bitcoin’s global mining carbon footprint is equal to that of Denmark.
The report also suggests alternatives such as switching from Bitcoin’s current proof-of-work algorithm to proof-of-stake, which is more energy-efficient. Under a proof-of-stake consensus mechanism, coin owners with a vested interest in the cryptocurrency create blocks instead of miners. This makes the energy consumption of proof-of-stake negligible when compared to proof-of-work, which requires power-hungry machines to perform complex computational tasks and eventually discover a block.
Do you think the proof of work-based cryptocurrencies model is sustainable? Let us know your thoughts in the comments below.
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