What does is cost to MINE 1 BTC?
23rd September 2021
Before we get into the juicy information, let’s first take a look at the current market conditions.
BTC Fundamental & Technical Update
The negative economic news coming from China has weighed on all financial markets this week, including BTC. Risk assets declined due to fears of a contagion event spreading from Evergrande (Chinese property developer), who are preparing to default on their loan obligations later today. Evergrande managed to make a $36 million payment on its debts yesterday which has provided some relief to the market but is likely to miss another $85 million interest payment due today, followed by a $47.5 million payment due on September 29th. Risk OFF has been the theme of the week, however, BTC rallied over $4000 USD since Evergrande settled an initial debt obligation yesterday.
Why does this matter?
The Chinese property market is on a knife-edge. This also implicates a number of global institutions that have exposure to the company, Blackrock and HSBC are just a few. Australia may also be hit the hardest with miners facing a decreased demand for essential building materials such as Iron ore. Investors/institutions facing liquidation events on open positions may look to decrease exposure in other areas such as crypto in an attempt to raise cash holdings. This is how a contagion event takes place and impacts multiple markets. There is also FED tapering and the US debt ceiling weighing on the market sentiment. Unfortunately, Bitcoin is not insulated from a risk-off move. BTC and the SP500 have had a 45.2% correlation during the 30 worst days of the S&P500.
Now, the most important question is whether the recent price action on BTC is just a corrective pullback, or are prices heading lower?
BTC TECHNICAL ANALYSIS
The corrective structure (ABC), let’s take a trip back in time…
All financial markets, from equities through to cryptos face corrective pullbacks which provide an opportunity to re-enter long positions. What they have in common is the nature of the pullback. Generally, most pullbacks in the market are made up of 3 waves, labelled ABC. The theory is based on Elliott Wave patterns. Once a breakout occurs above the B wave peak, buying volume spikes and a bullish trend resumes.
BTC 4 Hour Chart
The recent correction is no different from the classic ABC corrections that have taken place previously. I encourage you to jump into the BTC charts and take a look at all the pullbacks. You will no doubt find numerous examples of ABC corrective structures. However, before us bulls can get too excited about a continuation to the upside, BTC must find support on the $49,000 resistance, which is the B wave peak. A rise above the $49,000 resistance will attract a number of speculators and investors back into the market, especially the weak hands that have been flushed out over the past week. The increased volume will provide the fuel BTC requires to continue the bullish trend.
Now you have an understanding of the key technical levels, here is the juicy information…
What does it cost to mine 1 BTC?
There are pros and cons to mining BTC rather than buying the asset outright. Below we are going to outline the estimated costs it takes for you to mine 1 BTC. This is why institutional money is flowing into the mining side of BTC. Of course, there are a number of unpredictable variables in play, such as the overall network hash rate, mining difficulty and the price of BTC. However, using the current market conditions we can estimate what it will cost to mine 1 BTC across the miners that are currently available.
The figures above are based on an $0.115 AUD per KWH in our hosted facility. Using the estimated BTC mined per year, per miner, we can calculate a rough date of when 1 BTC will be mined. Your total cost to gain 1 BTC would include the initial outlay for the miner, followed by the daily electricity rate to run the miner within the hosted solution. The estimated cost of mining 1 BTC is presented in AUD values.
Today, the price of BTC in AUD value is $60,220. Therefore mining BTC over the long term gives you the ability to accumulate BTC with a 50% discount to the current market value. The S19J for example would provide 1 BTC with a total estimated cost of $28,483 AUD. Not a bad discount!
The S19J is also slightly easier on the wallet on a monthly basis due to the smaller power draw and is estimated to mine 1 BTC over only 3.94 years. Of course, the halving event in spring 2024 will impact the figures. However, the next three years will provide a great opportunity to accumulate as much BTC as possible through mining.
If you see the value of BTC staying above $30,000 AUD over the next 5-10 years then mining BTC is the best method to accumulate the asset.
Again, the figures in the chart should be used as a rough guide only, they are not to be used as exact figures due to the ever-changing market conditions.
If you have any questions or would like to discus any topics in the article, please reach out using the book a call link below.
Thanks, Tony Fernandez
Head Market Analyst