Crypto mining resembles IRL mining in a lot of ways. For instance, real-world miners have to invest in heavy machinery for their business, the competition is high, and the number of valuables in the world is limited. These are all challenges crypto miners face, as well.
Statistically, crypto mining is still profitable in 2022. However, consider the high electricity cost and maintenance of machinery that comes along with it. Whether you are planning on becoming an individual miner or looking to start a cryptocurrency mining company, the following discussion will be helpful to come to terms with the reality behind the deed.
Is it Worth Crypto Mining in 2022?
There are two answers to this question. Firstly, if someone has been mining crypto in the past few years, yes. Crypto mining is still profitable because these miners likely own the required hardware for the job.
On the other hand, if you are new to the sector and have no backup in terms of hardware or low-cost electricity, then crypto mining may not be the most lucrative pursuit. The number of challenges you have to conquer quickly dilutes whatever profit you would make from the venture. You may want to consider other ways to invest in cryptocurrency.
Comparison Of Crypto Mining 2022 with Former Years
The year 2021 was the most significant period for everything crypto. The months of April and May of 2021 saw the highest profits ever in the short history of blockchain, and it was a crypto boom. Naturally, the profit percentage has dropped since then (around 40 percent).
Does that mean crypto mining has become nonprofitable in 2022? Well, no. The 2021 statistics were not standard, so the whole world became aware of cryptos simultaneously, which caused an overwhelming reaction. Therefore, naturally, when things cooled down, the numbers dropped.
Suppose you compare the profitability of crypto mining with the trend of former years (starting from 2018). In that case, you will notice that the earnings are still very promising. Someone using GPU mining would have earned around 0.0005 Bitcoin per day in 2019, translating to only $4 a day. Because back then, one BTC was equal to 8000$.
However, these days one Bitcoin is approximately $40,000. Or five times what it was worth. The daily income of the exact miner is now twenty dollars a day. In simpler terms, crypto mining is five times more profitable than it used to be three years ago.
Forward to 2020. One BTC was equivalent to $95,00. And the daily earnings of a crypto miner were around 0.0008 BTC. In other words, $7.5 a day. Well, this was in the first half of 2020. By the end of the pandemic year, one BTC was like $20,000. Putting the per day income of the miner at sixteen dollars. Translate that into today’s (2022) bitcoin rate, and it’s $33 daily.
In 2021, the world went nuts about bitcoin, which made the rates soar higher. As a result, one BTC became equivalent to $5,000! Consequently, the average miner, who mined around 0.0006 BTC a day, made $30 daily.
Since then, things have slowly returned to normal. The typical miner can mine around 0.0004 BTC a day at an average hash rate or $16 daily in 2022. Although this is a drop compared to the abnormal statistics of late 2020 to early 2021, the earnings are still not out of trend with former years.
Consider the Challenges Of Crypto Mining
The above discussion might motivate some to start digging for crypto. However, before going deeper, consider the challenges of crypto mining.
Mining Equipment is in Short Supply
Crypto mining requires advanced computing power utilized in GPUs and ASICs. These things are typically out of stock at familiar retailers and hard to acquire at reasonable prices.
A handful of companies hold a monopoly on the manufacturing and distribution of crypto mining hardware. The chips that aid in fast performance are in short and limited supply. Moreover, the manufacturers decide who shall get those and who won’t.
The bottom line is crypto mining hardware is hard to get a hold of in the first place. Even when you do, you need to have a proper liaison for acquiring the technologies that would come in the future.
Crypto Mining is Expensive
If someone wants to start mining crypto as a company, they would first have to acquire capital. This means getting investors who understand and appreciate cryptocurrency. And there are not a lot of investors like that.
Plus, the miner needs a well sorted out plan to keep costs at a minimum in terms of space, electricity, and equipment. To ensure a steady supply of advanced mining hardware, a miner has to sign long-term contracts with the manufacturers at the very beginning of the venture.
As a result, a crypto miner starts his journey under the burden of debt. With the highly unpredictable nature of this relatively new market and the high-interest rate of loans, a crypto miner can find himself in deep waters in months.
Energy Requirements Are High
Mining bitcoins essentially means employing high-performing machines to complete complex, inhumane calculations at the fastest possible rate. That requires a tremendous amount of computing power, which eats up a lot of energy.
A bitcoin transaction requires around 1,544 kWh of power (ref). This energy can easily sustain an average American home for 50 days. This can give you a general understanding of how energy-demanding crypto mining can be.
Therefore, a miner has no choice but to arrange for cheap and sustainable energy. In other words, a crypto miner might even have to build up a windmill farm to mine his crypto coins.
Social and Environmental Concerns
Aside from the high requirements and working in an unpredictable and unprecedented industry, crypto miners also have to deal with political pressure and environmental concerns.
Many countries have yet to legalize cryptocurrencies. These countries are concerned about frauds and challenges to the centralized government-dependent money system. Plus, crypto and blockchains are such complex concepts for ordinary people to grasp that they can become quite a nuisance in developing countries.
There is concern from environmentalists. Because not all miners will use sustainable energy, some of them can afford to use old forms of energy. Considering the amount of energy crypto mining burns, this practice can wreak havoc on the climate.
Can You Mine Bitcoin on Your Own?
Crypto mining as a company can present significant challenges. So, how about doing it from a personal level with smaller income goals? Well, the same challenges persist in a different form.
For instance, a laptop computer was enough to mine bitcoin in the earlier days. The average CPU had enough processing power to take on complex calculations.
However, things have gotten significantly tougher since then. As a result, without getting Application Specific Integrated Circuit or ASIC machines, you cannot do bitcoin mining these days.
The price of these machines starts at around $1,500 and goes up from there (ref). ASICs will need frequent updating. Meanwhile, the average miner can hope to mine about $5,760 worth of BTC a year at the current rate.
How To Profit from Crypto Mining in 2022?
There are a few challenges to conquer if someone wants to make a profit from crypto mining in 2022. So, it would help if you adopted strategies to find a way around them. One of them is joining a mining pool; the other is investing in profitable coins.
Join A Mining Pool
Joining a crypto mining pool can save individual miners from some of the extreme cost and energy demands. Multiple miners combine their resources to mine a crypto block in such an arrangement. When they are successful, the profits are distributed among the participants based on contribution.
Mining pools require little to no fees at all. Expenses are usually cut from the profits—no need to worry about the initial joining cost. Also, participating in larger pools is beneficial because they have more hashing power, and therefore payouts come more often. However, ensure the pool is secure and not vulnerable to fraud and hacking.
Invest In Profitable Coins
If you dig, then dig for gold. Try to mine the most profitable coins in 2022 in terms of their value in fiat currency. From that outlook, Bitcoin, Ethereum, Monero, and Litecoin are the most beneficial.
The value of cryptocurrencies is a few dollars here and there every day. On average, Bitcoins are currently valued at around $40,000. Ethereum is equivalent to roughly $2500, Monero is close to $200, and one Litecoin equals approximately $100.
Among these, Bitcoins and Ethereum demand a lot of computing power. Meanwhile, Monero and Litecoin are less demanding regarding resources and, therefore, easier to mine.
So, is crypto mining profitable in 2022? Yes, it still is, if you are up for its challenges. A crypto miner should always be prepared for the sudden ups and downs in the market. Hopefully, this article provided you with a good insight into the state of cryptocurrency in 2022.
This article originally appeared on Wealth of Geeks.
Isaiah Webby is the lead writer for Get Loot (https://getloot.io/). He has a wealth of knowledge about the finance industry and enjoys sharing his insights with others. He also believes that everybody should have an opportunity to build wealth, regardless of their background or circumstances. When he's not writing, Isaiah likes to spend time outdoors hiking and camping with his friends. He's witty and charming, and always up for a good conversation.