Genesis Mining, which is one of the biggest crypto cloud mining services with 2 million customers, says that Bitcoin mining has become unprofitable. It says that its Bitcoin mining contracts aren’t even making enough money to cover maintenance fees. As such, it is terminating all open-ended contracts, meaning contracts that don’t have a term, within the next 60 days.
The drop in Bitcoin price is one of the main reasons Genesis Mining contracts are no longer profitable, considering that Bitcoin has dropped from USD 20,000 to USD 6,000 since December 2017. However, the price of Bitcoin is far higher than it was one year ago, and the main factor making mining unprofitable is the increase in Bitcoin mining difficulty. Miners purchased tremendous amounts of equipment as Bitcoin’s price rose and the effect on Bitcoin’s hash rate lagged the market. Bitcoin difficulty has been rising all year, due to increased mining hash rate throughout 2018 despite the drop in Bitcoin price. Hash rate exceeded 50 exahash/s recently, the all-time high and currently, Bitcoin mining difficulty is near 6 trillion. When Bitcoin price hit its all-time high in December 2017 mining difficulty was less than 2 trillion.
Genesis Mining is saying that customers have the option of purchasing 5-year Bitcoin mining contracts that can’t be terminated. They are offering an upgrade to the long-term contracts for USD 180 per TH/s for 5 years, which is reduced from USD 285 for customers that don’t have the open contracts. The maintenance fee is USD 0.14 per day, which is apparently reduced from the fees for contracts with open terms. Apparently, the down payment for the contracts is being used to reduce the fee. 1 TH/s at the current difficulty produces USD 0.27 per day, so that’s USD 0.13 of profit per day.
This comes out to 1,385 days for Genesis Mining customers to break even at the reduced rate, and 2,192 days at the normal rate for 5-year contracts. For normal contracts, this means the break-even time is six years, longer than the length of the contract.
It appears to be an illustration of how cloud mining Bitcoin is a risky venture at best. Most experienced miners recommend buying your own equipment and working with a group of people to buy Bitcoin mining equipment at wholesale prices.
Of course, Bitcoin has strong long-term potential, so even if mining with Genesis is unprofitable in the current conditions, it could end up being very profitable to save the small amount of Bitcoin these contracts produce if Bitcoin hits USD 100,000 or USD 1 million like some experts expect.
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