Is investing in a mining rig still worth it? (2024)

Crypto mining was once an extremely profitable venture. It turned early miners into millionaires and attracted the interest of massive mining companies that currently rule the industry. However, with most coins currently in the dumps thanks to the bitter crypto winter, doubts have begun to surround the profitability of mining. Those looking to enter the space are now second-guessing the decision, wondering if it is worth the investment.

Is cryptocurrency mining still worth a shot, and is it a good investment for the future? Tag along to find out.

What is crypto mining?

Crypto mining is the process through which transactions are verified, and new coins are generated. Miners use extremely sophisticated computing machinery called Application Specific Integrated Circuits (ASICs) to solve challenging mathematical problems. They compete against each other to solve these puzzles, and the miner that solves them first, gets to add the next block.

In exchange, the miner is rewarded with newly-minted coins. The more problems you solve, the more blocks you add and the more rewards you get as a miner.

The cost of mining and the factors affecting it

Two essential factors heavily determine the cost of mining a cryptocurrency — the price of electricity and network difficulty. Electricity is the primary raw material that mining requires, while the difficulty level determines how much processing power it could take to solve the puzzles.

The most common ASIC for mining, the Bitmain Antminer, consumes around 3,250 watts per hour. You can multiply that by your region's electricity cost if you are an individual miner. Then multiply that by 24, considering you will need to run the rig throughout the day.

Climate also plays a crucial role in setting up a mining rig. This is because mining rigs generate insane amounts of heat. Therefore, if you set up your mining rig in a country where electricity costs are cheap and the climate is extremely cold, it can ensure efficient mining with lower production costs.

The cost of setting up mining rigs is one major component. ASIC miners are pretty expensive. Depending on the size of the rig you want to set up, the cost will vary. Generally speaking, these specialised computers currently cost anywhere from $2,000 to $6,000. Other factors include the physical space required to set up the rig and the cooling system to fend off the heat and keep the hardware from crashing. Not to mention running repairs and maintenance costs.

Is it still profitable to mine BTC or other cryptocurrencies in 2022?

Until a few months ago, mining BTC was still quite profitable. Towards the end of July, MacroMicro, a company that compiles global economic data, estimated that the cost to produce one BTC was around $16,000. Earlier in June, JPMorgan provided an even lower estimate, stating that the cost to produce one Bitcoin per day was around $13,000.

However, a lot has changed over the last few months. Bitcoin mining difficulty saw a 13.55 percent spike on October 10, its largest increase in 2022.

Moreover, the FTX crash has caused prices to drop even lower in the last few weeks. Combined with rising energy prices, these factors have resulted in the lowest mining revenue in two years. It is one of the reasons why many BTC miners are using their mining rigs for other purposes and looking to tap alternate revenue sources.

Data for altcoin mining is sparse, but the profitability figures should be in proportion with those of Bitcoin. As such, it would only be viable to mine BTC or any other cryptocurrency in a country where electricity is cheap. Moreover, it must be ensured that the entire electricity cost, plus the cost of setting up the rig, is not more than the cost of the crypto mined. Otherwise, the miner will run into losses.

Mining for the long-term could still hold rewards

While the current outlook of crypto mining looks bleak, some experts still believe in the long-term prospects of mining. Most big miners have already established their rigs, so all they must bear now are the electricity costs. Many of these giants employ the 'mine and hold' strategy wherein they hold on to the rewards and only sell when prices peak.

Retail miners looking to get into altcoin mining can employ a similar strategy. Mining may entail losses at current prices, but crypto markets are cyclical and tend to rise after a fall. Therefore, if a miner can set up a mining rig, handle the losses and hold on to the rewards, they could see significant profits if and when the prices of the various altcoins take off in the future.