By David Meyer
March 16, 2018

“Mining” Bitcoin is a notoriously expensive business—recent calculations by the lighting company Elite Fixtures suggest that it costs a fortune to mine one Bitcoin in some countries, with the cost being as much as $26,170 in South Korea.

Now analysts at Fundstrat have said that it’s no longer particularly profitable to mine Bitcoin. “Bitcoin currently trades essentially at the break-even cost of mining a bitcoin,” the research house said in a Thursday report.

How does Bitcoin mining work?

Bitcoins are created when a “miner” (essentially, a node on the Bitcoin network that boasts very fast computers) beats other miners to package up the latest block of Bitcoin transactions and add it to Bitcoin’s blockchain—its famous shared ledger.

The winner, who receives newly-minted Bitcoin as their reward, wins the race by providing the answer to a mathematical problem that is deliberately designed to use up a lot of computing power, in order to maintain stability in the speed at which these blocks are “found.” People often say the miners solve mathematical problems, but all they really do is repeatedly try to guess a lucky number, as quickly as possible, using the brute force of powerful computers.

Why does Bitcoin mining cost so much?

Fundstrat’s model for calculating mining costs takes a few factors into account. The first is the cost of the computers themselves—as the mathematical problems get progressively harder over time, miners need to keep upgrading their rigs. The second issue is energy. Making loads of incorrect guesses uses a lot of it. And then there’s cooling; all that energy use throws off a lot of heat. (Bitcoin is, of course, terrible for the environment.)

Which brings us back to Bitcoin’s profitability. This wasn’t a problem when the cryptocurrency was heading “to the Moon,” as enthusiasts were fond of putting it, but since late last year, Bitcoin has largely been heading in the other direction. Having gone to near $20,000 in mid-December, it’s currently worth little more than $8,200.

According to Fundstrat, the current break-even point for Bitcoin mining is $8,038.

Miners contend with Bitcoin transaction fees

As CNBC noted, miners not only have to deal with increasing competition and a falling Bitcoin price—they’re also being stung by another part of their revenue, transaction fees. While Bitcoin adherents cite low fees as an advantage of the cryptocurrency over traditional finance networks, the median fee for a transaction reached $34 in late December. Now it’s down below 50 cents.

So is everyone going to give up and stop mining Bitcoin now? Not likely. Its profitability depends greatly on energy costs and, while Fundstrat’s model uses a global average of 6 cents per kilowatt hour, Chinese miners apparently only have to pay 4 cents or less.

Whether or not the activity still makes sense really depends on where you are.

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