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Huge gap in profits of crypto-assets exchanges vs. miners

Updated: Jun 17, 2019

While the profit of exchange platforms has remained pretty stable around 45% as a percentage of revenue, miners have seen a significant drop in the profit margin.


Decline in Bitcoin mining profits

Sources: BQ Intel, Blockchain.com, Etherchain, Coinmarketcap, Diar, Bloomberg, Digiconomist


Trends in crypto-assets mining industry

News of mining plants closing or at least suspending business, continue to hit the headlines. For instance, Bitmain, the Chinese mining giant, has closed several offices (Israel, Netherlands, and Texas). Giga Watt in the US has also been forced to cease operations. This trend has resulted in the available bitcoin hash rate decreasing by 25 percent to 30 percent since October, despite the overall annual increase. In turn, this has an impact on the safety of the bitcoin network.


Only low-cost mining plants are today operating with a limited profit (the rest being unprofitable, see figure 6), mostly thanks to advantageous contracts with electricity providers. Even for these miners, unless mining difficulty level adjusts as a result of more miners unplugging, the threshold is 2,400 USD/bitcoin.


The consequences of this bear market are already being felt. China’s dominance in hash power concentration continues to increase, thanks to its competitors being driven out of business. Additionally, nobody is buying brand-new mining equipment, so business is also slow for mining rig vendors.


More positively, the decrease in hash power has reduced electricity consumption and consequently the environmental footprint of PoW for the time being.


Check the full version of Blockchain Quarterly (Q1 2019) report for more Insights.