Bitcoin: Cryptocurrency Mining Still Growing Despite Huge Price Drops

Artistic impression of physical cryptocurrency coins

Marc Brussels / Alamy

Cryptocurrency mining continues to consume more and more computing power, despite a global price drop, making it a less attractive economic proposition.

Miners of currencies such as Bitcoin and Ethereum are rewarded with cryptocurrency that fluctuates in value against traditional currencies. So while their costs are predictable, their earnings vary. On November 8 last year, the price of bitcoin was over £50,000, while on May 15 it was just under half at £24,244. Ethereum fell from £3567 to £1647 over the same period.

Despite these falls, the miners seem resilient. The total hashrate of the bitcoin network, a measure of the amount of computing power spent on mining, continues to reach unprecedented heights. The latest data from the Cambridge Center for Alternative Finance (CCAF) shows it reached 248 exahashs in February, while more recent data indicates it has continued to rise in the months since. Ethereum miners have also proven to be resilient to falling prices. On May 15, the Ethereum hashrate was 1103 terahashes per second, according to YCharts data, while a year earlier the rate was just 613.

An increase in hashrate raises concerns about the environmental footprint of the cryptocurrency industry, as more intensive calculations generally require greater electricity consumption. This should be offset by a move to more efficient hardware, said CCAF’s Alexander Neumueller. He estimates that bitcoin’s current annual electricity consumption is 141 terawatt hours, similar to the amount used by Egypt.

“The network hashrate is undoubtedly an important variable, but the answer to the question of power consumption is much more complex,” he says. “In our model, we assume that miners are rational economic agents, in other words, they only mine profitable material. Therefore, it is believed that as profitability declines, older, less efficient hardware will be wiped out.

Along with recent price drops, the cryptocurrency industry is still grappling with the impact of a Chinese cryptocurrency mining ban that went into effect last May. CCEF says in a blog post today that the ban has worsened, rather than improved, cryptocurrency’s environmental footprint as miners looked elsewhere for cheaper, but not necessarily greener, energy.

Artist Kyle McDonald, who uses cryptocurrencies in his work and has published previous research on Ethereum’s energy consumption, claims that a decrease in the price of a coin should lead to a decrease in mining, but it can happen over longer periods of time. “Right now, despite the price drop, we’re not seeing any unusual hashrate drops,” he says. “There is currently a slight downward trend in bitcoin, but not beyond the usual variability. In another week we may be able to see if miners are constantly closing some of their installations, which would indicate that they are operating on narrow profit margins.

And there are anecdotal signs that an Ethereum drop is also on the way. An Australia-based Ethereum miner named Josh Ward said: new scientist that the mining economy was less attractive now that the price had fallen. “The drop in profits is disappointing,” he says. “It made me rethink how I see the opportunity cost of mining. On an individual level, there are quite a few people who give up mining and sell their rigs because of stock market crashes. †

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