Bitcoin mining in 2022: Is it still profitable & what are the challenges? (2024)

Bitcoin has been the de facto gold standard for cryptocurrencies around the world. The fact that a majority of the top cryptocurrencies are affected by Bitcoin’s performance corroborates its value in the crypto ecosystem. However, two of the biggest reasons that Bitcoin is the most-valued crypto globally are due to its limited supply and because it’s tough to mine.

A recent report by 911Metallurgist, which is a mining research and analysis firm, says that the mining cost of procuring 1 Bitcoin in India as of March 2022, is around $40,425, which is roughly Rs 32.13 lakhs. Now, this calculation is based on the data acquired from the World Bank and Cable.co.uk and also the number of days and wattage that is required to mine Bitcoin using the Avalon 1246 miner from Coinwarz.

Just for context, the price of 1 Bitcoin at the time of writing this story is $22,993 (Rs 18,33,944 approx).

The report also highlights the mining cost of Bitcoin in other countries, where the highest cost has been recorded in Venezuela ($246, 531) while the lowest has been reported in Kuwait at just $1,394. In countries like Qatar, North Korea, Kazakhstan, Angola, Zambia and Sudan, the mining cost for 1 Bitcoin is less than $10,000.

Though Bitcoin isn’t the only crypto that is being mined around the world, it certainly is the most coveted one that offers the maximum returns possible on each token mined.

However, the vertiginous drop of Bitcoin from an all-time high of near $68,000 to a current trading value of $23,953 has made it difficult for miners to sustain operations and reap profits at the same time.

Despite the downfall, there are still many mining farms and nodes that are mining Bitcoin relentlessly. Why is mining important? Is there still profit in mining Bitcoin in 2022? What is the cost that miners are incurring and what are some of the challenges? Let’s find out.

Bitcoin mining & its importance

Bitcoin mining is a complicated process that involves validating Bitcoin transactions on the blockchain. Bitcoin miners use powerful computers to run mathematical calculations where the resulting output is a 64-digit hexadecimal code. This happens through a process called a hashing function. This code is added to a decentralised ledger where transaction blocks are created. These blocks are then added to the Bitcoin blockchain, which is a network of computers globally running the Bitcoin software.

The process of mining is extremely power-intensive and miners currently get rewarded with 6.25 BTC ($148,786) tokens for mining a block and adding them to the blockchain. Today, miners are deploying powerful machines called Application-Specific Integrated Circuit (ASIC) that are much smaller in size and have more computational power than conventional GPU (Graphics Processing Unit) and CPU (Central Processing Unit) mining rigs.

Mining is quintessential to the Bitcoin blockchain’s security and validity. It sits at the core of Bitcoin’s consensus method, which is proof-of-work (PoW). With the help of PoW, miners in the blockchain reach a consensus on a transaction before adding it chronologically to a blockchain. This is how the Bitcoin blockchain is able to maintain a decentralised ledger.

What factors determine the cost of Bitcoin mining?

Though the market price of the token plays a crucial role in the Bitcoin mining ecosystem, there are other key aspects that determine the cost as well.

The difficulty is a measure of how difficult it is to mine a Bitcoin block. If the difficulty level is high, rewards are less and if difficulty levels are low, the rewards are more.

Recently, due to a crash in Bitcoin prices, many ASIC miners with high electricity costs were switched off, due to which the difficulty level dropped by 10 percent simultaneously, resulting in a 10 percent increase in Bitcoin production.

Miners also need to factor in the climate in an area before setting up a Bitcoin mining setup.

It is estimated that the Bitcoin mining network alone uses over 120 Terawatt-hours of energy per year. That’s around 0.6 percent of the global energy supply and almost the whole of Argentina’s electricity supply in a year!

Miners at Bluewheel Capital use hydro & nuclear power sources of energy that are more sustainable and environment-friendly compared to coal and fossil fuels. However, even these do not help reduce the cost of mining.

Additionally, you also have to factor in the cost of setting up a mining rig. You might have to consider the cost involved when choosing between ASIC and GPU mining hardware for a better mining strategy.

Both GPU and ASIC mining hardware are pricey, so the cost of setting up will depend on the size of the rig. For example, one powerful ASIC might be priced the same as a couple of GPUs, while there may be times that several GPUs might be cheaper than a single ASIC unit. Therefore, you also have to consider factors like cooling units and physical space for your operation to yield profits in the long run.

Is Bitcoin mining still profitable?

Being the most-valued crypto in the market, the returns on mining Bitcoin are also on the higher side compared to other cryptos. Considering the current value of Bitcoin, many miners in countries where electricity is cheap are able to yield profits as opposed to places where hardware and electricity costs are more.

But here’s the thing, in order to get profits out of Bitcoin mining, you need to make sure that your mining rig setup plus electricity cost is less than the value of Bitcoin mined.

Just like the mining of physical assets like gold and silver is affected by their prices, even Bitcoin’s mining cost is affected by its trading price. Back in November 2021, Bitcoin was trading at almost $68,000, which is an all-time high for the token to date. Today, it’s trading at between $23,000-$25,000, which has made a substantial number of miners jump ship.

Despite the dip, there are a lot of miners who are still invested in this space and mining Bitcoin. Vikash Agarwal from Bluewheel Capital, which is a crypto mining firm headquartered in Dubai, said that Bitcoin mining is still profitable.

Rohit Khandelwal, who is the co-founder of CoinGabbar.com and also a crypto influencer, also believes that Bitcoin mining is still profitable and miners are accumulating the mined crypto right now to sell it later when the Bitcoin price is up.

Since many of the crypto miners have already established their mining rigs, there isn’t any additional cost involved apart from the electricity cost which they’re ready to bear. Since Bitcoin is at a low and the cost of electricity is getting higher, most of the miners are looking to adopt the ‘mine and hold' policy.

Also, you also need to understand that mining rigs require regular maintenance, so you need to be wise before choosing between the ASIC and GPU mining strategies for maximum profitability.

So, while crypto mining is still considered profitable in many parts of the world, one primarily needs to factor in the cost of mining in their country as it differs from one region to the other.

Bitcoin mining in India vs other regions

Stringent policies and the increasing antagonistic demeanour of many people who lost money in crypto investments in India have led to crypto being crucified on TV debates and social media. Crypto adoption is taking a hit and so has mining.

Compared to countries like Russia and Dubai, crypto mining in certain parts of India is more expensive because it mostly boils down to the cost of electricity and climate.

Also, mining in countries that have a cooler climate is cheaper compared to India due to low temperatures, so less airflow management is needed.

But the climate isn’t the only challenge for Bitcoin mining operations in India. Ever since the Indian government imposed heavy taxes on digital assets including Bitcoin, people have been dissuaded from investing in this space. To make things worse, there are no tax exemptions when you’re venturing into the mining side of the business.

Just like how crypto investors are recommended to do their own research before investing in cryptocurrencies, businesses looking to enter mining also need to consider factors that will ensure their businesses thrive in the long run.

The future of crypto in India hangs in the balance with ambiguity around regulations and laws for crypto. With countries like Russia, Dubai, and some middle-eastern nations offering better returns for miners with lenient tax laws and the availability of hardware, it’s no surprise that these places are becoming more popular for the crypto mining industry.