How did Russia start the latest “Bitcoin mining crisis”?

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Last Updated on 2 June 2022 by CryptoTips.eu

Jeroen Kok

Jeroen is one of the lead copywriters on Cryptotips.eu and discusses all recent events in the crypto market. This includes news updates, but also price analyzes and more. He developed his passion for cryptocurrency during the bull run in 2017. He has learned a lot since then. The combination of cryptocurrency and creative writing is perfect for Jeroen and an excellent way to share his knowledge with a wide audience. Find me on LinkedIn / [email protected]
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How much money you end up with every month depends on 2 factors. First of all how much you earn via your employer (or if your self-employed, how much you can charge for your services), but also very important is to keep an eye on what you spend. If you spend more than you earn, it’s probably time to look for a new profession or consider whether you really need all that takeaway.

Just like this, Bitcoin mining’s profitability relies on 2 factors: how much Bitcoin is worth, and how much it costs to mine (or as Gilfoyle explained: whenever the value of Bitcoin dips below a certain value, it’s no longer efficient to mine).

Given that the difficulty of mining a bitcoin block fell by 4.3317% to 29.897T on May 25, miners have anxiously been looking at the price of energy.

Advertentie.

Shanghai lockdown

That price is of course impacted by various factors. This week alone there’s been an agreement within the EU to cut off imports of Russian oil, which will further increase the price of oil, and China finally decided to relieve Shanghai’s two month lockdown.

“The problem now is the price of energy on a gross basis, but also the volatility in energy price,” explained Alex Brammer, VP at crypto-mining infrastructure company Luxor Mining. “It’s really hard to model forward what energy prices are going to be.”

If we just look at oil futures, it’s easy to see how come energy is so expensive at the moment. Because of the war in Ukraine and other factors, oil is now trading at levels not seen since July 2008. Furthermore, analysts foresee that oil may spike toward $150 per barrel once China ends its COVID shutdown nationwide.

Speaking to Wired, Daniel Jogg, CEO of Enerhash, a company running blockchain data centers, admitted that in May energy rates in Europe had risen so dramatically that “some operations were running without profits.”

Best to continue to see $30k Bitcoin then, or oil below $100.

prokop.foto / Depositphotos.com