Ethereum Price Expected To Rebound With Difficulties In Mining
Miners are expected to drop out of the loss-making business anytime due to a number of factors.
For How Long Will Ethereum Miners Keep making Losses?
Despite ethereum enjoying a stable market run, miners might not be having a smooth ride. The second largest cryptocurrency has stabilized at $200 with the second largest market capitalization of all cryptos.
According to a LongHash analysis, miners in ethereum might be losing a lot. LongHash states that ethereum’s hashrate has significantly declined by about 12% from August. In other words, miners are making huge losses instead of making money while mining ethereum.
LongHash is now focusing on the impact on the price of ethereum. The concern is on how much will ethereum drop. However, the price might just rise to $300 due to a lower supply of the coin. Economically, a decrease in supply results in higher prices.
If the ethereum in supply lowers, the crypto will witness a rebound in value. But a keen look at the activity around Ether shows that it might be moving in the opposite direction. The crypto is witnessing massive sell-offs within ICOs resulting in an increased supply of ethereum.
According to an earlier Bitmex report released early this month, we can see a similar movement. A big chunk of ICOs had sold ethereum in the last two months. By the time the report was released, ICOs had only 4% of ethereum in supply.
Miners are now contributing the largest chunk of ethereum in supply at the moment. For them to continue supplying ethereum, they need to make profits. In the event, ethereum mining costs are more than income, then many will leave the scene. In return, it will result in less ETH in the market leading to higher prices.
The cost of mining is effected by about four main factors. It depends on the energy and cost of mining equipment, mining regulations, a drop in the value of mining machines and hashing challenges. The most significant factor is always the cost of electricity used in mining. For ethereum, mining depends on GPU which is affected by RAM bandwidth which does not improve performance to cost. Another problem arises in terms of purchasing ASIC machines. After nine months the machines might not be of any value.
Emerging challenges in mining ensure that equipment revenue does not cover power charges. Low cost of electricity plays a key role in the work of miners. Notably, many miners are located in China despite the country being unfriendly to cryptocurrencies.
These factors make mining a loss-making venture. Miners might end up abandoning the business. In return, we will have a low supply hence leading to high prices and a renewed interest in the process by those seeking financial gain.