Bitcoin is currently at $42k, can you mine crypto in 2022? Is crypto mining still safe and smooth giving miners a profit?
From the emergence of Bitcoin in 2009 until now, it is still a hot topic of public discussion, both among investors and policymakers in the government.
The issues that have surfaced recently are about the carbon footprint of Bitcoin mining which is not environmentally friendly and the high power consumption of Bitcoin blockchain’s Proof of Work framework.
- 1 What to watch crypto in 2022?
- 2 Mine crypto outlook in 2022
- 3 What is the challenge of mine crypto in 2022?
- 4 Is mine crypto worth it 2022?
- 5 How to solve Bitcoin’s carbon problem?
- 6 Final thought
What to watch crypto in 2022?
The main focus of what will be seen for the crypto trend in 2022, is mainly related to the negative issues in the cryptocurrency infrastructure and the emergence of new crypto assets that continue to grow like mushrooms in the rainy season.
China at the end of last year banned crypto, but according to Fortune magazine, China is chasing NFT. Even though they blocked the Ethereum blockchain that supports NFT.
While the United States has yet to fully map crypto. The news is that the government will regulate crypto policies. And many companies that have started to open up to crypto have given a new breath to cryptocurrencies.
Mine crypto outlook in 2022
Crypto enthusiasts or investors in 2022 will have many questions swirling the crypto-verse, a term that describes the crypto world. Here are a few things that need to be looked at and are important to focus on for cryptocurrency enthusiasts and the environment.
Volatility becomes an important topic for an investor because they will benefit due to volatility. Although it also hides a comparable risk.
If you look at the overall volatility of cryptocurrencies, when the mother crypto i.e. Bitcoin was dropping, it was followed by the drops of other cryptocurrencies including Ether, Litecoin, Dog, etc.
This volatility is caused by demand and supply, which are the overall market mechanism. This volatility can be triggered by investor behavior due to policies. Such as the Fed which will increase interest rates more quickly to contain inflation, which can affect investor behavior.
Although in many countries, cryptocurrencies are still not fully regulated. The trend of companies adopting cryptocurrencies can provide new opportunities for the expansion of the crypt-verse.
For example, retail company Walmart. The company created its cryptocurrency and launched NFT, which is a door that opens for other companies to follow. As Bloomberg reported. Other companies have opened up to crypto. Elon Musk Tesla, Jack Dorsey, and Michael Saylor’s MicroStrategy who added Bitcoin to the balance sheet, leave the crypto space still open.
According to Galaxy Digital Research, there has been an increase in venture capital in the crypto world.
For example, the successful OpenSea raise funds from the public. This largest NFT marketplace raised $300 million in Series C funding at a $13.3 billion post-money valuation.
FTX also launched its Venture division, led by Lightspeed Venture partner Amy Wu.
Evolution of Ethereum
The carbon footprint generated by mining on the Proof of Work framework is becoming a serious issue in the crypto-verse. For sustainability, Ethereum will evolve from the Proof of Work consensus using the Proof of Stake consensus known as Ethereum 2.0.
By using Proof of Stake consensus, you will save up to 99.5% energy according to the Ethereum Foundation. The merger between Proof of Work and Proof of Stake is planned for the 2nd quarter of 2022.
Crypto regulation is still a hot topic in 2022. From the statements of stakeholders, both the pros and cons are still trying to make a comprehensive regulation of cryptocurrencies. The Securities and Exchange Commission has sought to provide parliament with an explanatory lens.
Not only regulation in the United States but in other countries, it is also important for crypto investors, it will provide investment convenience in countries with clear regulations on cryptocurrencies.
What is the challenge of mine crypto in 2022?
The challenges of the crypto-verse in 2022 will still overshadow its development and growth. Like a two-sided coin, it will always be opposite one and the other that can never be put together. The pros and cons will look at different sides, which will give rise to different views and opinions.
Climate change issue and mine crypto
Climate change could be a hot ball that hits Bitcoin, as Bitcoin mining contributes a high carbon footprint and can harm the environment.
Bitcoin uses a proof of work consensus, where miners use supercomputers with great power requiring full operation throughout the day.
Unfortunately for the power consumption, most of the electric power sources are from coal, which results in high carbon emotions and damages the atmosphere, which results in global warming.
Kazakhstan is the second place for Bitcoin miners, the government has started cracking down on illegal miners in the country. The main reason is power consumption which can cause an increase in the load of electricity consumption.
Central bank go-to digital
This is the second challenge for Bitcoin and other cryptocurrencies, as central banks in several countries have been trying to create their digital currencies.
China was the first to issue a digital Yuan, so it’s only natural that the government bans crypto in the country on the grounds of causing economic instability.
Other countries, such as Russia to Chile, have sought and started to build CBDCs and digitize their currencies.
Crypto regulatory legal tender
The first country El Salvador to adopt Bitcoin as a legal currency in that country may be able to influence other countries to make Bitcoin a legal tender.
Central American in September last year has also adopted Bitcoin as a valid currency on the other side of the US dollar. Even though they legalized Bitcoin, they received a warning from the IMF because high price volatility could have implications for overall macroeconomic conditions.
Taming the ‘wild west’
In August the Securities and Exchange Commission had urged Congress to set policy on what they called the “wild west” for the Defi platform.
Defi platforms are known to have grown rapidly such as Lending, derivatives, trading, at this time. Ying-Ying Hsieh, associate director of the Center for Cryptocurrency Research and Engineering at Imperial College in London hopes for a clear definition to govern the framework.
Is mine crypto worth it 2022?
Mining competition in 2022 is probably to be more intense. According to Didar Bekbau, founder and CEO of the Kazakhstan-based miner Xive, mining conditions have entered a risky and uncertain condition.
He further added that the digital asset mining landscape in 2022 has changed due to delays in the supply of new rigs amid increasingly fierce competition.
Coindesk estimates that it will allow mining companies to make acquisitions amid shrinking squeezed margins. Here are the trends that will shape Bitcoin mining, quoting from Coindesk.
It is estimated that in 2022 there will be an increase in the mining hash rate due to the presence of new players with better equipment. Although Chinese miners are banned from carrying out activities in the country, there are a large number of them who are leaving China and starting online.\
According to the CEO of Gryphon Mining, Rob Chang, it is possible that the hash rate by the end of 2022 will reach 300 EH/s.
But another view comes from Bitmain, with BitFuFu CEO Leo Lu saying the hash rate increase will not occur until March, arguing that Kazakh miners still face power rationing. While construction of new operations in the US and Russia will slow down, due to geopolitical conflicts. In addition, China is cracking down on mining pools.
The trend that will form in 2022 is probably about margin compression. Miners who have low costs with powerful mining engines will be able to compete with profits. While the machines that are old will face difficulties, especially regarding the cost of electricity.
New entrants will face difficulties in obtaining cheap access and connections to such power supplies.
Rise miners join the project
New players who enter will spawn a hash rate war. This battle will be won by companies with large capital and devouring small miners. As expressed by Thiel of Marathon, where he hopes his company after raising nearly $700 million, grows aggressively next year.
Several Asian companies are already entering in the project including Singapore, Jasmine Telekom Systems, and from Malaysia Hashtrex’s Gobi Natha, which in 2022 will facilitate on a large scale.
Meanwhile, from Europe, Cryptocurrency Mining Group and Maverick Group reportedly will expand mining investment in Europe and Russia.
All mining requires electricity as the carrying capacity of its operations which is mandatory for every miner. However, many criticisms arise due to the mining process which requires electricity consumption which is mostly from coal fuel which is not environmentally friendly.
Miners will think about getting renewable energy sources but still at competitive prices. ESG [environmental, social, and governance] compliance will force cryptocurrency mining companies to get greener sources of electricity.
Miners have begun to look for energy sources from solar, wind, and hydro as well as nuclear which does not leave a carbon footprint.
Fast money vs value investors
In the predictions, Investors increase in 2022 amid investors who make mining a Bitcoin investment proxy. Especially in large institutions that have a long-term profit target. Meanwhile, fast money will prefer to invest in IPO fundraising.
An expectation is that in 2022 there will be an increase in funding in the mining sector following the trend of the previous year. Wherein IPOs attract many investors in this sector.
Uncertainty supply chain
Mining processes that require chips in the supply chain have encountered a bottleneck in 2021. And this could re-establish further supply chain problems that hinder the mining process.
The supply chain problem over the shortage of chips occurred due to the Covid-19 pandemic and international tensions on geopolitical conditions between China and America, and Russia.
It doesn’t just impact miners. But the global shortage of chips is also hitting 169 industries, from cars to soap manufacturing.
Migration mining rig
China has banned all activities related to cryptocurrencies, this condition has forced Chinese miners to leave the area or stop their operations.
It is posssible that this condition will bring miners to spread to other countries outside China such as Kazakhstan, North America. The old miner will re-install the mining installation in the new location.
New miners technology
Another trend that will form in 2022 is about efficient mining technology. Mining companies will focus not only on high-speed computers creating new innovative technologies that are cost-efficient and increase profits.
For example about immersion cooling technology to increase performance without adding a new computer. Technological innovation is still possible in 2022.
How to solve Bitcoin’s carbon problem?
The carbon problem is a problem that is a scourge for Bitcoiners, but how to solve the carbon problem for individual miners is a debate among Bitcoiners themselves.
Some opinions include a sentence to switch to Proof of Stake, which will save 90% more energy than using consensus Proof of Work.
However `other opinions argue, that moving the Proof of Work consensus mechanism to proof of stake consensus will eliminate the original purpose as in pre-bitcoin. Which by using proof of work is to secure the network from hackers.
The opinion continues for sustainable Bitcoin is to create environmentally friendly green energy. Furthermore, every four years the halving event will reduce the miner’s reward by half, in the end, the miners will only get from the transaction fee. It will reduce power consumption by itself.
Bitcoin mining will face challenges in the year 2022 with uncertainty. Warming global geopolitical conditions also affect the supply chain of chips that miners need it.
The stagnant Bitcoin price is also a challenge in itself, which can lead to shrinking margins due to operating costs.
Restrictions on the power supply are also a challenge for miners. Even when dealing with the government, illegal miners will face more problems.
Note: this article is informational only and does not constitute investment advice. Forex CFD market, crypto is a risky asset. Each investor is responsible for their investment.
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