21 Dec 2021

Bitcoin mining profitability on the way down after an amazing autumn

Declining profitability causes mining stocks to tumble.
Source: CoinMetrics, HashrateIndex
We estimate the cash flow of mining one bitcoin for two of the most popular machines: Antminer S9 and S19. S9 demands more electricity to mine the same amount of bitcoin than its big brother S19.Cash flows have decreased by 50% for the S9s and 36% for the S19 since November 9th. Less efficient models, like the S9s, are more susceptible to changes in bitcoin prices or power prices.Even though cash flows have fallen, mining is still highly profitable. Cash flow margins of the S9 and the S19 are 52% and 83%. Even after the recent decline, cash flow margins have improved in 2021 since the bitcoin price has increased faster than the hashrate.The recent profitability decline has led to a reduction in the share prices of publicly listed mining companies. Since November 9th, Marathon is down 56%, while Riot Blockchain has decreased by 43%. The bitcoin price is only down by 32% in the same period - showing that mining companies are more volatile than the bitcoin price.As more hashrate continue to come online, we expect the profitability of mining to continue trending downwards over the next months.This calculation only consider the operational costs of bitcoin mining. Although electricity is the highest operating cost, capital expenditures also play a big part.
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