In late 2021, Bitcoin reached its all-time high price of 68,000 USD. Back then, it was probably safe to say that miners were having a great time in terms of profits. As a result, many of them upgraded their equipment, expanded their operation, and prepared for an even bigger 2022.
However, as we probably know by now, things have taken quite a turn. The cryptocurrency market is crashing and now, Bitcoin is hovering just above the 21,000 USD mark at the time of writing. Simultaneously, the price of electricity has gone up across the world, adding another layer of problems for Bitcoin miners.
The question now is: will Bitcoin mining operations stop during the crash?
Bitcoin mining 101
Before we dive deeper into what’s happening in the current cryptocurrency crash, let’s first answer the question: what is Bitcoin mining?
Basically, Bitcoin mining was the original method for getting your hands on some Bitcoin. It’s a process wherein people from all over the world use high-powered computers to solve complex mathematical problems and verify transactions on the Bitcoin blockchain. In return for all their hard work, they’re rewarded with newly-issued Bitcoin. Essentially, Bitcoin mining is a race to solve the block first and the one who gets there first is handsomely rewarded.
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It’ll slow down but not stop
Since the market is crashing and it’s getting more costly to mine Bitcoin, it’s likely that operations will slow down during this time. How much these operations will actually slow down will depend on the scale.
Miners who are running lean operations—cheap operational costs, favorable expenditure costs, low leverage, etc.—are probably going to have an easier time going through these volatile times. People who are using older equipment will see that their operation is becoming less profitable by the day, so if the price doesn’t make a swift recovery, it’s likely they’ll be shutting things down during this choppy time.
However, that doesn’t mean all operation will stop. Some of them will, but most will just slow down.
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The only time it’ll stop is when all Bitcoin is mined
One of the many things that make Bitcoin unique is its limited supply cap of 21 million. At the time of writing, around 19 million Bitcoin have been mined and it’s estimated that the last BTC will be mined by the year 2140.
Although it has a cap of 21 million, it’s doubtful that that’ll be the amount of Bitcoin circulating once everything has been mined. Some studies have shown that even at this point, already 20% of the Bitcoin already mined has been permanently lost—people lose access to their wallets and private keys.
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So, after all the BTC has been mined, miners will still work on verifying the transactions that happen on the Bitcoin blockchain. Instead of being rewarded with newly-issued Bitcoin, they’re probably going to be rewarded with transaction fees.
Is it advisable to mine Bitcoin right now?
Back when Bitcoin burst onto the scene in 2009, there weren’t a lot of people mining it. This meant that it was a much less competitive space, allowing anyone who tried the opportunity to mine newly-issued Bitcoin.
However, throughout the many booms Bitcoin has had, many people have caught on and began to start mining. This means that these days, you’ll have a lot more competition, and to keep up, you’ll need the most advanced equipment and have to run an extremely efficient operation. If you want a fighting chance, you can also join mining pools or clouds but the most important thing to understand is that there’s a lot of work to be done if you plan on Bitcoin mining. Be sure to do your research and stay informed on what’s going on in the space before you put your money into any mining equipment.
What to do during the cryptocurrency crash
During this point of the crash, you’re probably hearing words like “HODL” and “FUD” a lot. Those that have been in the space for long enough, they’re probably aware of what these words mean.
For those that don’t know, HODL—short for hold on dear life—is a trading strategy wherein someone will buy Bitcoin at a certain price and hold onto it until it reaches their desired value, no matter how long that will take, meaning they could be waiting days, weeks, or even years.
It’s a trading strategy that’s simple, easy, and perfect for beginners. The difficulty of the strategy is when FUD comes along. FUD, or fear, uncertainty, and doubt, are the negative feelings investors will try to spread to influence the price of Bitcoin. For example, people could try to spread negative statements about Bitcoin to bring its price down and potentially bring the price of another coin up.
For many people out there, HODLing is something that they’ll do in response to the crash. The challenge would then to be cancel out all the FUD happening. As for what you should do, it all depends on what you consider to be comfortable moving forward—just make sure that you aren’t panicking, acting rashly, and making ill-advised decisions that aren’t rooted in research.
A cryptocurrency crash isn’t the end of the world
We understand that there’s a lot of panic going around now since we see a dip in Bitcoin’s price. However, the biggest thing you have to understand is that this has happened before, so don’t panic.
Also, Bitcoin isn’t something that is just used for investment purposes anymore. It has many real-use cases—wealth preservation, store of value, remittances, e-commerce, transactions—and people will still need it no matter what the price is. Because of its ability to help the unbanked and underbanked, people can easily get a free Bitcoin wallet and finally participate in the transactions that they were previously disqualified from.
At the end of the day, we’re now living in a world where the price is Bitcoin’s secondary purpose, and the sooner you understand that the more you’ll be able to stay calm during these crashes.
