HONG KONG: Bitcoin miners face a reckoning as the cryptocurrency’s tumble wipes out profits for all but the industry’s most efficient operators, according to Bloomberg New Energy Finance.

Only miners with access to “very cheap” electricity of about 6 cents per kilowatt hour or less can stay profitable after Bitcoin slumped to US$6,000 on Tuesday, said Sophie Lu, an analyst at Bloomberg New Energy Finance in Beijing.

If Bitcoin stays this low for more than a couple of weeks, miners with high operating costs will leave the market, she said.

“There are definitely some miners who are already out of the money,” Lu said, adding that the industry’s most efficient players can keep going until US$3,000.

Bitcoin’s meteoric rise to nearly US$20,000 last year prompted hordes of new miners to enter the fray -- everyone from individuals with a single machine plugged into their bedroom wall to companies with giant server farms powered by hydroelectric dams. With prices in the stratosphere, the Bitcoin-denominated rewards that miners received for verifying transactions more than covered the cost of electricity and computing power.

But the economics are much less compelling now that prices have tumbled and the difficulty of mining Bitcoins has increased. The industry’s daily revenue plunged to US$16mil on Monday from a record US$53mil on Dec. 17, according to Blockchain.info.

“If you buy mining equipment now, it’s no longer profitable,” said Zhou Shuoji, a founding partner at FBG Capital, a Singapore-based cryptocurrency investment company.

In theory, Bitcoin should find support as its price approaches the cost of mining a new coin, Zhou said.

But the cryptocurrency’s value is also a function of its demand, and right now that’s looking shaky as worries over tighter regulation around the world send investors for the exits. - Bloomberg