Investing in cryptocurrency mining in 2022: is it still profitable?
Is cryptocurrency mining still a profitable investment? In this video (in French), we speak both to beginners, with a refresher on how mining works and the hardware it uses, and to miners who are already equipped, with our method for calculating the return on investment (ROI) of a graphics card and then of a complete rig.
Video from May 2022: the figures below date from that time. See "What about today?" at the end of the article.
Mining in a nutshell
Mining means putting your machines' computing power to work for a proof-of-work blockchain: miners validate transactions and receive a cryptocurrency reward in return. You can mine solo, on your own, hoping one day to be the lucky one who finds a block, with a large element of chance. Or you can mine in a pool, as a group: rewards are shared according to the computing power each member contributes, which gives much steadier income.
ASICs or graphics cards?
ASICs are machines designed to mine a single cryptocurrency or algorithm, with very high computing power. On the other hand, they are expensive, from €5,000 to €15,000, and very noisy: their fans can be unbearable. A breakdown can tie up thousands of euros that no longer earn anything. That is why, at the time, we did not use them ourselves: we did not want to risk a problem on a €10,000 or €15,000 machine.
Graphics cards are more versatile: they can switch from one cryptocurrency to another. They come with a 2- to 3-year warranty depending on the brand, and branded power supplies (Corsair, for example) with 5 to 10 years. The truly fragile parts of a rig are the risers, the small boards that connect the GPUs to the motherboard. In 2022, NVIDIA's RTX 3000 series cards (RTX 3060, 3070, 3080, 3090) generally offered the best efficiency, meaning the best ratio between mining power and power consumption.
The ROI of one card: the RTX 3070 example
Let's take the example of an RTX 3070:
- Hashrate: 47.5 MH/s for 121 W;
- Price: a good price was between €650 and €700;
- Earnings on Ethereum: $1.79 per day not counting electricity, $1.26 once electricity is paid, with a kWh estimated at about $0.18.
For a card bought at $700, the calculator shows a payback in 392 days (about 13 months) if you don't pay for electricity, and in 550 days (about 18 months) if you do, like most miners. By comparing this ROI from one model to another, you can spot the most attractive cards at market prices.
The ROI of a complete 1,000 MH/s rig
To reach 1,000 MH/s, you need 1,000 ÷ 47.5, i.e. 21 RTX 3070s. At €650 per card, that comes to about €13,600, and about €15,000 with the rest of the hardware (motherboard, power supplies, frame). The cards draw about 2,700 W, or roughly 3,000 W with the rest of the rig.
In early May 2022, such a rig accumulated about 0.40 ETH per month, i.e. a little over €1,060 before electricity. With a kWh at €0.18, about €680 per month was left. Dividing €15,000 by about €675 gives an ROI of about 22 months, compared with 18 months for the card alone, because the rest of the rig also has to pay for itself.
What drives profitability
- The price of the cryptocurrency: in early May 2022, Ethereum was worth just under €2,700, a fairly low level. To simplify, if you keep your ETH and sell once the price has doubled, at around €5,000, the ROI drops from 18 to 9 months. It all depends on how you see the future of crypto;
- Mining difficulty: the more computing power on the network, the more miners share the cake. On Ethereum, difficulty had almost doubled in a year: with the same hashrate, you mined almost twice as many coins a year earlier;
- Resale value: at the end, the cards keep a residual value that we estimate at 25 to 30% of their price, or even a third, which improves the real ROI accordingly;
- The choice of coin: with Ethereum's announced move to proof of stake, miners would have to mine something else. Graphics cards make that possible: Ravencoin, Flux, Ethereum Classic, Ergo, Beam, or even dual mining two coins at the same time.
Taxes
In our view, mining by the rules in France normally requires a business structure, at least a micro-enterprise or a proper company, and declaring the mining income. Through a company, that income is subject to corporation tax, potentially 25 to 30%. In return, the company can buy all the hardware and cover the electricity, which reduces the taxable profit.
What about today?
Ethereum's move to proof of stake took place on 15 September 2022: since then, Ethereum can no longer be mined with graphics cards, GPU mining income has collapsed and the figures above are out of date. The method, however, still applies to ASIC miners, which have become the norm: purchase price ÷ net earnings per day, taking into account the coin price, network difficulty, electricity price and resale value.
To run the numbers with current hardware, use our Bitcoin mining profitability calculator and browse our ASIC miners. No space or no cheap electricity at home? Have a look at our miner hosting. And for the context of the time, also read our article Which cryptos to mine in 2022?
This article summarises the content of the video and does not constitute investment advice.