A ray of hope: BTC mining profits hit a 19-month low, but gross profits rose

At the end of 2018, BTC mining operations saw a significant reduction in revenue due to the bear market lows. In 2019, revenue continued to decline, but in the past few weeks, network computing power has climbed again. A report released on March 4 showed that even though mining profits fell to a 19-month low in February, gross profit margins increased from 32% to 39%.

With so much bad news coming one after another, is there still hope for the mining industry?

Cryptocurrency mining is a highly competitive industry, and miners processing the SHA-256 algorithm (BCH and BTC) have seen some deep losses in recent months. Last August, despite the price drop, the combined hashrate of the Bitcoin Cash (BCH) and Bitcoin (BTC) networks was still over 65 EH/s. However, on December 2, 2018, the average value of the combined hashrate of BCH and BTC fell below 32 EH/s, and the hashrate was halved. Since then, the combined hashrate has gradually recovered and now averages around 45 EH/s.

According to the latest report from research firm Diar, mining profits are returning to growth in terms of profits. BTC mining companies' revenues fell to their lowest level in 19 months, with an overall loss of 10% in February this year. Diar explained that BTC miners earned $295 million in transaction fees in December 2017, but their current block rewards and transaction fees combined only make $195 million.

Diar's research suggests that a number of smaller miners have shut down and most equipment is operating at a loss. However, not all news is bad for the mining industry, as gross margins increased in February.

“Increased competition has also caused gross margins to decline from 94% at the beginning of 2018 to 32% a year later. Perhaps a silver lining for the mining industry is that gross margins grew to 39% in February.”

BTC and BCH mining profits are comparable

Data from Blockchain.com on the distribution of BTC hashrate shows that there are 14 large mining pools mining BTC, with 23% of the hashrate belonging to unknown miners. There are 13 mining pools mining BCH, with more than 10% of the hashrate being controlled by unknown mining pools.

At the time of writing, the profitability of mining on the BTC network is 0.7% higher than that of BCH, and the profitability difference between the two blockchains has also been quite stable. Currently, the six top BCH mining pools are also the leaders among BTC mining pools.

The next generation of mining machines can continue to be powered on

Diar’s analysis shows that since gross margins are now higher, miners can “use capital expenditures to purchase the latest mining equipment to stay ahead of the curve.”

“Bitmain’s latest flagship mining machine, the S15, which began shipping at the beginning of this year, has sold out twice, and the next batch of products will be shipped in April. Next month, the hash rate may continue to increase unless the market plummets - but at the current price of Bitcoin, the capital requirement is still that the return rate of the S15 mining machine is 84% ​​higher than that of the S9 on average.”

The bear market is long, but the growth in gross profit may help the miners relax their tense nerves in the bear market.