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Bitcoin prices can drop by half and China's miners will still make money

Even at the country's highest regulated electricity tariff, miners can profit from bitcoin as long as it's worth more than $6,925

Dan Murtaugh | Bloomberg 

Photo: Reuters

is so profitable in that the could fall by half and miners would still make money, according to Bloomberg New Energy Finance.

Even at the country’s highest regulated electricity tariff, miners can profit from as long as it’s worth more than $6,925, BNEF analysts including wrote in a report Wednesday. The digital currently trades around $14,200.

Bitcoin’s 1,400 per cent surge last year saw greater demand for electricity to run the computers used in the cryptocurrency’s About three-quarters of those machines ended up in China, the world’s largest electricity user, which is now seeking to discourage the practice given a surge in power use in some provinces.

under the current price is likely to be profitable under any electricity price regime in China,” Lu wrote.

power use is facing more scrutiny, particularly in China, which is concerned miners are taking advantage of low electricity prices. Digital transactions require energy-intensive computer networks, with the industry now using as much power as 3.4 million US households, according to Digiconomist Energy Consumption Index. is said to be planning to limit power use by miners, which are starting to look elsewhere.

Rising Demand

Electricity demand for rose to about 20.5 terawatt-hours a year by the end of 2017, according to BNEF. That equates to more than half the 38 terawatt-hours of electricity used annually by the world’s biggest miner, -- or a 10th of the electricity needed to power South Africa.

In China, miners used 15.4 terawatt hours, which is just a blip in the country’s massive power industry. Even though it plays host to the world’s biggest community of miners, they only used 0.2 per cent of the country’s annual electricity production, according to the report.

It’s difficult to predict how much power will be used to mine in the future, Lu wrote, as it depends on how efficient the computers running the complex calculations needed for become and how many additional computers will be used in the process. Miners earn bitcoin-denominated rewards for performing the complex calculations needed to confirm transactions in the

While is profitable at the highest regulated electricity price of $0.13 per kilowatt-hour in China, many companies can take advantage of overcapacity in the power-generating sector to negotiate rates as low as $0.03, Lu wrote. Breakevens are achievable at $3,869 at those power prices, Lu said.

And if does make good on its plan to restrict miners’ power use, they could move to new regions quite easily, Lu wrote. The computers used in aren’t expected to last more than two years and the other equipment involved is relatively cheap.

“The overall threat to the sustainability of the global network may not be so drastic,” Lu wrote.

First Published: Wed, January 10 2018. 15:32 IST