The big question when it comes to Bitcoin mining is can you make money doing it, and if so, how much money so here is my analysis. As most investors know, Bitcoin remains one of the most valuable and popular cryptocurrencies today.
If you want to join the Bitcoin frenzy without purchasing the digital currency using an exchange, mining is the way to go. However, you should keep in mind that mining bitcoins come with its expenses and risks.
Can you make money mining bitcoin? Yes, it is possible to make money mining Bitcoin; however, it’s not a guaranteed return on investment. Factors such as electricity rate, mining hardware, mining difficulty, and Bitcoin’s price can determine profitability.
My main goal with this is to reveal how much money you could have made by deploying one of the most popular Bitcoin miners on the market. Over the last few weeks, I embarked on an ambitious journey to establish what one miner would have potentially made using Bitmain’s S9 Antminer that first launched back in July of 2016.
I gathered a lot of valuable data that we shall analyze to determine whether you can mine bitcoins profitably from a long term perspective. I genuinely believe you’ll be surprised at my findings and that it may help you make an informed decision if you’re thinking of investing in bitcoin mining.
Read on to discover the truth behind bitcoin mining and how you can still make money mining this digital currency. Let’s begin by doing a short recap of what Bitcoin mining is.
What Does It Mean to “Mine” Bitcoin? A Quick Overview
Unlike the conventional paper currency that is printed by the federal government and issued by banks, bitcoins don’t come in a physical form. While that may seem like a good thing, there is a significant risk of hackers trying to create bitcoins from nothing. That is where bitcoin mining comes into play.
In simple terms, bitcoin mining is the process of keeping the transactions over the bitcoin network secure. It involves updating the ledger of Bitcoin transactions referred to as the blockchain. The Bitcoin network runs on a highly decentralized ledger.
Anyone who wants to participate in the process of updating the ledger of transactions can do so. All you need to do is guess a random number that solves a relatively complex equation generated by the system, and you are good to go. While that may sound simple, there is more to it.
As a reward for doing the tedious work of updating the ledgers and securing transactions, miners earn bitcoins for each block they successfully process. Several years ago (between 2009-2010), you could easily mine up to 50 bitcoins per day on a standard PC.
However, things are no longer the same. As more bitcoins get mined and more powerful mining rigs introduced to the network, the mining difficulty rises. Today, you need a powerful miner that can make as many guesses as possible to increase your chances of winning mining rewards.
In this article, I’ve explained the process of Bitcoin mining in great detail. Be sure to read it to learn more about how Bitcoin mining works.
How Much Money Can You Make Mining Bitcoin: S9 Case Study
In mid-2016, Bitmain launched the world’s first-ever commercially available bitcoin miner based on a 16nm processing chip that delivers 14TH/s while only drawing 1380 watts of power. The relatively high hashrate and low power consumption make the S9 a super-efficient miner.
Equipped with this knowledge, I headed to this Bitcoin mining calculator to establish how many bitcoins one would have managed to mine with the Antminer S9 between July 2016 and September 2019.
The calculator takes into account several key metrics, including the miner’s hashrate, mining difficulty, power consumption in watts, electricity cost, hardware costs, and pool maintenance fees.
The reason I chose to compile this information using the S9 miner is to point out that Bitcoin miners appear to be most efficient when they get first released on to the market. From here, I pulled the historical data on bitcoin mining difficulty from Blockchain.com so that I could project accurate mining profits for each month. In my data compilation, I was interested in three crucial areas:
- How many bitcoins could the Antminer S9 mine in a day? This figure would help me establish the average number of bitcoins that one could mine in a month.
- The average cost of power used to mine daily. This figure would help me determine the cost of electricity consumed by the miner in a month. For reference, I used an electricity rate of 0.12 cents per kWh, which is the average cost of power in the United States.
- Bitcoin prices. I needed to capture the bitcoin close price for every month to help me calculate the amount of profit/loss made during any particular month. Thus allowing me to compare whether it was more profitable to mine and hold or cash out everything monthly.
Once I had this information, I was able to calculate the average number of bitcoins mined in a month, the cost of electricity, and the profit made in that particular month. I came up with the following spreadsheet to help me establish potential bitcoin mining profit for someone who set up the S9 miner in July 2016.
|DATE||Total BTC Mined Monthly||Electricity Cost Monthly @ $0.12 USD||Monthly Profit After Electricity Costs||Realized BTC After Elec Cost|
|Num Of Months||Total Gross BTC Mined||Total Electricity Costs @0.12 cents||USD Profit If Cashed Out Monthly||Realized BTC After Electricity Costs|
The four crucial takeaways from the data above are:
- The total bitcoins mined over the whole course of mining were 5.26
- The total cost of electricity purchased mining at a rate of $0.12 per kWh was $4,764
- If you were to cash out all bitcoins mined every month, you would be left with $3,487.30 as net profit. From the data, this was not the best strategy.
- If you were to mine and hold on to the bitcoins while only cashing out enough to cover electricity costs, you would have been left with 3.005490193 bitcoins. It’s obvious to me that this was the best bitcoin mining strategy to maximize profits.
What Does This Data Mean?
If you carefully study the data above, one for sure thing stands out; if you had set up the Antminer S9 in 2016, you would have recorded a profit every month except for a few indicated in red. It is thus proving that you will not be making a profit every month. There are certain times when you may record a loss. It is crucial to keep this fact in mind before you start mining.
For slightly over three years, the Antminer S9 mined 5.26 bitcoins. If you were to take care of the electricity and other hardware costs, this would leave you with approximately 3.005490193 Bitcoins (assuming you were only cashing out enough bitcoin to cover your electricity costs).
At the time of publishing this post, the price of one bitcoin was $9,304.86. Now, assuming you have accumulated 3.005490193 bitcoins from 2016 and you wanted to cash out now, how much will that be? Let us see:
3.005490193BTC ✕ $9304.86= $27,965.67
This means that anyone with a .12 cent per kWh rate, which set up the Antminer S9 in 2016 when it first launched, would have accumulated around 3.005490193 bitcoins and can cash them out now for approximately $27,965.67. From an economic perspective, this is not a bad return on investment given that the initial price of the S9 miner was $2100 when it was first released on to the market.
On the contrary, you would have only made $3,487(after hardware and electricity costs) if you were cashing out all the bitcoins you had mined every month. That would have been a bad investment strategy. Therefore, if you are looking to mine bitcoins profitably, consider choosing this investment path.
Disclaimer: In my research, I used the Antminer S9. Just because mining with this mining rig seems profitable, it doesn’t mean that all forms of mining are profitable. You should also keep in mind that other factors play a critical role in determining bitcoin mining profitability.
What Factors Determine Bitcoin Mining Profitability?
So, what is going to determine how much profit you can make when mining bitcoins? Apart from your overall investment strategy, the following factors come into play:
- Electricity cost: This is perhaps the most critical factor that will determine how much money you make mining bitcoins. A lot of power is required to validate the network and keep everything running. To establish how much power your miner is going to consume, be sure to check its power consumption and efficiency. Ideally, you want a miner with a high hashrate and low power consumption to increase your chances of success. In this case, the power consumption of the Antminer S9 was 1380 Watts.
- Mining difficulty: Bitcoin mining difficulty refers to a figure that represents how difficult it is to mine Bitcoins considering the overall amount of mining power in the system. As more powerful miners are added to the system, the mining difficulty rises. In 2009, when Bitcoin was first launched, you could easily mine up to 50 bitcoins on a standard laptop. That is no longer the case thanks to the powerful miners that have been developed over the years.
Here is a graph showing the increase in bitcoin difficulty from 2010 up-to-date.
- Hashrate: The mathematical problem that a miner’s computer needs to solve to be rewarded with bitcoins is known as a hash. Therefore, the hash rate refers to how many guesses your mining rig can make per second. The higher the hashrate, the better. Hashrate is usually measured in MH/s, GH/s, or TH/S. In this case, the Antminer S9 had a hashing rate of 14TH/s, which is massive.
- Pool fees: A significant number of miners out there mine through a mining pool to increase their chances of success. If you are among them, then you already know that the pool keeps a certain percentage of your earnings for rendering the service.
- Power consumption: Each mining rig out there consumes a different amount of energy. It is essential to find out the exact power consumption of your preferred miner before you start mining. This will help you in calculating projected profitability. The power consumption of a miner is usually measured in watts. In this case, the power consumption of the S9 miner was around 1350 watts.
- Bitcoin price: The price of bitcoin plays a critical role in determining mining profitability. Unfortunately, it keeps on fluctuating, which can be a big challenge. You never know when the prices are going to rise or fall. The only thing you need to do is trust your instincts when it comes to cashing out your mined bitcoins.
Is Mining Bitcoin Still Profitable?
From our analysis, we can conclude that bitcoin mining is still profitable if done right. The word “right” in this perspective means taking advantage of the latest miner on the market and doing everything possible to keep it running at a higher efficiency.
Furthermore, the Antminer S9 is probably no longer a good investment since a new, more powerful, and efficient miner just hit the market -the S17 series from Bitmain.
However, the data provided above illustrates the kind of potential return on investment (ROI) that you can expect when you are quick enough to invest in a new miner when it is first released.
Therefore, as an ASIC miner, your priority right now should be to acquire the new S17+ miner and not the old S9 miner since Bitcoin mining difficulty has gone up.
The S17+ miner is equipped with a massive hashrate of 73TH/s @2920 watts and operates with a power efficiency of about 40J/TH +10%. With such a powerful miner, you increase your chances of making money mining bitcoins.
While many people out there think that it is almost impossible to mine bitcoins profitably, the truth is you can still make money mining bitcoins in 2019 and beyond. As long as you deploy the latest miners and implement powerful strategies, you can be sure of making good profits from bitcoin mining. Do you still have any questions about making money mining bitcoins? Let me in the comments section.
Disclaimer: The information contained in this article is in no way investment advice. It is merely an opinion based on a statistical analysis of data that I gathered from reliable sources. Be sure to conduct thorough research and make a sound judgment before you start to invest your money in bitcoin mining.