don't flinch

Bitcoin Miners Fried in Game of Chicken

As prices plunge, most are losing money. They're all headed for the cliff unless some pull out.
Photograph: iStock/Getty Images

Bitcoin miners who've decided to stay in the game amid plunging prices may soon find that the well has run dry.

A 70 percent price drop since the heady days of mid-December has cut profitability to the bone. With the cryptocurrency hitting $6,000 on Tuesday, only the biggest and most efficient can stay above water, but even these are balancing on a knife edge, according to a Gadfly analysis.

Big Dip

Bitcoin has fallen as much as 70 percent since its December high

Source: Bloomberg

Unless you're an outfit running the fastest rigs bought at wholesale prices -- -- 67 percent of all mining power is in the hands of four pools -- chances are you're losing money. The arms race among participants has brought 40 percent more mining power online since Bitcoin prices went above $19,000 on Dec. 18. That's resulted in the rebalancing system built into the digital currency making it 51 percent more difficult to complete a block, according to data from

Miners forced to work ever harder for each Bitcoin have shrugged off this escalating requirement for computational power -- up 18-fold in two years -- because a 21-fold price increase over the same period made the cost worth the investment. 


Bitcoin computational difficulty and the amount of processing power brought online have climbed

Source:, Bloomberg Gadfly

Note: Data is indexed to 100 based on 7-day moving average.

Had Bitcoin stayed at its 50-day moving average of $13,200, then the average miner could expect to print $80 per week in profit at current levels of computation (hash rate) and difficulty. This is based on the very generous assumption that a miner is running Bitmain Technologies Ltd.'s Antminer S9 at 13.5 TH/s (retail price $2,320), one of the most advanced systems available, and the set-up is in China at wholesale prices. 1 Older equipment will have lower returns, and a lot of those mines are still online.

Knife Edge

Even the most advanced Bitcoin rigs risk losing money as prices slump and miners stay connected

Source: Calculations made using,,; analysis by Bloomberg Gadfly

Note: Assumes China wholesale price ($0.06/KWh), using listed specifications for Antminer S9 (13.50 TH/s), adds 30% cooling & operational costs, assumes retail is 30% markup from wholesale hardware price, 52-week depreciation schedule (Bitmain offers 180-day warranty). No transaction fee or pool fee. Hash rate and computational difficulty as of Feb. 6, 2018.

If the price doesn't rise, then the average miner is set to lose $3 per week at current levels. Mining syndicates such as Antpool -- which are probably buying their mines at less than the retail price -- may still be making money, but will be getting returns 90 percent lower than they would at that 50-day moving average.

The only way for miners to return to sustained profits is if Bitcoin prices rise, or some miners turn off the lights, lowering competition. History shows that while the latter is possible, it's unlikely. In fact, those who have plunked down millions of dollars to build their Bitcoin mining operations seem to be playing chicken in the hope that competitors will flinch.

If that happens, they reason, then the bravest miners will be left alone to enjoy the spoils. If it doesn't, then expect a lot to drive off the cliff together.

(Updates with data on mining pool concentration in the third paragraph. An earlier version of this column was corrected to fix an erroneous website name in the third paragraph.)
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
  1. While China has sought to force out Bitcoin mines, it is the largest base for them at present. 

To contact the author of this story:
Tim Culpan in Taipei at

To contact the editor responsible for this story:
Matthew Brooker at

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