Bitcoin Down by 50% and Mining Is Becoming Less Rewarding

In mid-December 2017, Bitcoin was able to hit its all-time high at almost $20K. Coming from around $1,000 during the start of 2017, it was a meteoric rise that caught the attention of many investors including those who don’t have any idea how blockchain technology works. In 2017, media attention was given to cryptocurrencies. But in 2018, things aren’t looking good for Bitcoin. The market capitalization for the top 50 cryptos has dropped by a staggering $387 billion. That’s over 53{4ede17fdd9b4ce8121d01fc4b54913fe84f8215aace504cc657695cefb5329ff} decline.

To give you an idea of just how bad things are today for cryptocurrencies, Bitcoin lost as much as 50.65{4ede17fdd9b4ce8121d01fc4b54913fe84f8215aace504cc657695cefb5329ff} since December 31, 2017. Ripple, on the other hand, lost 75.09{4ede17fdd9b4ce8121d01fc4b54913fe84f8215aace504cc657695cefb5329ff} and is also dealing with issues of its own including a lawsuit from investors.

Problem with Mining

One of the things that has been affected by the bearish market is the miners. The upfront cost of mining can be quite overwhelming. Mining activity requires a good amount of electricity. And for this reason, it is quite common for a  lot of miners to go towards places that have cheap electricity.

Tom Lee even mentioned that the key level for miners is at $5,000. At this point, they could probably be losing money. There is also a report saying that as long as Bitcoin stays above the $3,300 level that miners will be able to break even.

How exactly will this evolve? There are most likely miners that are now thinking whether or not to continue their operations and wait until the price of cryptocurrencies is up again. Or, will they be taking the risk and still wait for the time that cryptocurrencies experience another bull-run?

Nowadays, there is interest on the part of institutional investors. They are most likely waiting for regulatory clarity before getting involved in the crypto market. The good news is that there are those making the necessary move towards regulatory clarity such as SEC clarifying that Bitcoin and Ethereum are not considered as security. There is also Japan that is also making its effort even working with G20 countries to have a unified regulation pertaining to cryptos.

The Demand for GPUs are Slowing Down

Both Nvidia and AMD acknowledged that there is a decline in the demand of GPUs. And if you are a gamer, then this is good news. This means that there is more supply of GPUs in the market and even a better pricing mainly because crypto mining has become less profitable for the miners.

There are a lot of issues surrounding cryptocurrency mining. In fact, there are countries that are actively looking to ban crypto mining activities mainly because it has the potential to use a large amount of energy.  Not only does it raise the cost of electricity, it can also have an environmental impact. But as the crypto price is slowing down, can we expect less and less people to go towards mining? Or perhaps, more people would want to mine mainly because they are waiting for the next bull-run to happen and for them to make the most out of cryptocurrency rewards?