The Trouble With Mining Bitcoins

A user in the r/Bitcoin subreddit shared his wife’s complaints about their house being cold after selling off his Bitcoin miners.

It was a typical Reddit knuckleheaded joke thread, but the subtext is interesting: What are Bitcoin miners going to do with all their old mining rigs?

I’m not saying this because summer is approaching for the Northern Hemisphere and mining rigs make your home hot. I’m saying this because, as Bloomberg reported over the weekend, people are getting out of Bitcoin mining.

Just look at all the old mining equipment on eBay.

The Price of Bitcoin

There are a few reasons Bitcoin mining appears less attractive.

For one, it’s less profitable, at least right now. The combination of Bitcoin’s exchange value having recently dropped against fiat currencies ($459 at the time of writing) plus the competition in Bitcoin mining has eaten dramatically into that activity’s bottom line, at least on a small scale. It’s cheaper at this price for an individual to simply buy BTC from an exchange or an ATM.

When Bitcoin was worth double, at least in USD, last November, mining was certainly more profitable.

And, you know, the heat output helped offset a miner’s normal home heating costs.

Big Miners

But the arms race to build better mining equipment and the centralization of mining activity quickly made it hard for individual miners.

“If you mine at the moment, you have to be very lucky to get anything,” miner Mehmet Vatansever told Bloomberg. He bought $16,000 worth of mining equipment in February. “It’s a very difficult business.”

That said, the big mining operations are still doing OK. KnCMiner in Stockholm, which made a killing in November selling rigs, mined some 21,000 BTC in March using 7,000-plus machines, company co-founder Sam Cole said.

They also rang up an electricity bill of about $450,000.

An Altcoin Rush?

CoinTerra, Inc. and KnCMiner both told Bloomberg that since mid-March, Bitcoin mining equipment sales have slumped considerably, but more people appear to be buying lighter equipment to mine altcoins such as Litecoin.

You can mine Litecoin with just a CPU, so there is no need for huge, expensive rigs.

Meanwhile, if you are interested in Bitcoin mining still, check out Bitcoin Wisdom’s mining calculator here.

A Question For Our Readers

We’re curious to hear from you. Do you have a GPU or ASIC miner you bought specifically for Bitcoin mining that you’re no longer using, at least for that purpose? If so, what are you doing with it now?