Bitcoin crested above $50,000 on Monday, benefiting from simultaneous supply chain shortages and a crackdown from Chinese regulators – putting bitcoin mining on par with profits near the coin’s April all-time-high.
Now, building infrastructure for the energy-intensive business poses the greatest challenge for companies and individuals hoping to reap big money. That means finding cheap and reliable energy sources, striking deals and building out mining facilities.
“Throughout the summer, we saw a lot of fear and uncertainty. People were selling and now we’re seeing inflows again,” Meltem Demirors, chief strategy officer of CoinShares, told Yahoo Finance. “A lot of firms and investors are looking to get long in what we anticipate will be a very active fall.”
One major reason behind the price halving of bitcoin, the largest cryptocurrency, at the beginning of the summer came from concerns around its energy-intensive impact on the environment. Following the trend, Chinese regulators banned cryptocurrency mining, causing a large portion of the industry, at least temporarily, to cut operations.
While the immediate reaction to the news created uncertainty and major selling pressure, the crackdown reduced competition for mining bitcoin. As the cryptocurrency’s price recovered in mid-July, less intense competition meant higher profitability for remaining participants. At its current price, profits from mining bitcoin are close to its all-time highs.
That’s according to the hashprice index, an indicator created and tracked by the crypto mining analytics company, Luxor Technologies.
“I can’t help but think that we’re going to look back on these days as wildly profitable for miners. We definitely are in a golden age of [crypto] mining,” said Gerson Martinez, a former derivatives trader and market maker for Morgan Stanley. Martinez left the bank in 2013 to work in education and nonprofit. Since 2014, he’s held an ever-increasing interest in bitcoin. He owns the asset and also mines it through the retail-focused firm called Compass Mining.
Bitcoin mining is the number-crunching process that makes the digital currency secure. By rewarding miners for collectively validating transactions, bitcoin’s underlying blockchain has proved exceedingly costly and, perhaps impossible, for any one entity to garner majority control of its network. For contributing computing power to the blockchain, miners are rewarded for their work by collectively earning pay in bitcoin, which is called the block reward. Currently, that total pay out is 6.25 bitcoin every 10 minutes. With less miners currently in operation, the pay out gets split between fewer parties.
While the process is complicated, most bitcoin mining operations look like a specialized type of data server farm.
Martinez’s current interest in bitcoin mining lacks no ambition. As a dual citizen…
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