Chinese Bitcoin Miners Largely Unaffected by Volatility and Regulation
China has proven to be one of the most profitable locations for Bitcoin mining, even with the increased cost of electricity and reduced rate of mining. This would mean that if the dominant cryptocurrency were to fall by half its value, miners in China would still turn a profit.
Balancing Electricity Costs
The price of bitcoin is currently trading near the $14,000 mark but was valued at $6,900 as recently as mid-November 2017, less than two months before the date of writing this article. As long as Bitcoin’s value is above $6,925, Chinese miners turn a profit.
This benchmark is associated with the highest-possible electricity rate in China, inferring that mining is profitable under any electricity regime. Should the electricity be reduced to the wholesale price, the breakeven point would be $4,800. Were it to be further lowered to the discounted rate, the points at which profits are earned would lie as low as $3,900.
Approached from another angle, profits range up to $10,100 (72 percent) per bitcoin at the discounted electrical rate, up to $9,200 (65 percent) per bitcoin at the wholesale rate, and up to $7,100 (50%) at the industrial rate.
Thus, it is no wonder that miners from all over the world have set up Bitcoin mining operations in the country, despite its crackdown and impending mining regulation.
The Chinese government has expressed concern at the amount of electricity used by bitcoin miners, especially from hydropower stations which were intended to deliver low-cost or free electricity to low-income rural areas in the country.
Bitcoin mining is done through the solving of complex mathematical equations, which have the purpose of validating transactions on the blockchain. At the same time, new blocks are created, which is how freshly “mined” bitcoins (or parts thereof) are received by miners.
Where it was once possible to mine for bitcoins on an ordinary computer, as the digital currency has progressed through its main developmental stages, mining has become increasingly difficult. As a result, it is now necessary to use industrial-grade specially developed bitcoin mining machines.
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Naturally, the process is highly energy-intensive, with heat being produced as a by-product. Many miners have spoken of placing machines in their basements to heat their homes.
Consequently, China has made moves to clamp down on Bitcoin mining with the aim to eradicate it country-wide. Although highly inconvenient, miners in China saw this decision coming after the first Chinese crackdown on the cryptocurrency. In preparation for what was widely deemed inevitable, many miners have long since made arrangements to transfer their operations elsewhere.
Although China represents the vast majority of the world’s bitcoin mining industry, the consensus is that a mining crackdown in the country would not have a lasting effect on the industry or the cryptocurrency as a whole.
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Source: thebitcoinnews.com Read more here!