Cryptocurrency mining had been one of the trending activities back in 2017, with the market on an impressive bull run and most of the cryptocurrencies in their early stages. However, things had changed in the past two years and we would like to provide you with 4 reasons why crypto mining is no longer a viable activity, especially if you can’t allocate a lot of capital.
#1 Expensive equipment
Since cryptocurrency mining had become popular, the price of video cards had almost doubled. At the same time, ASICS, devices specially designed to mine, are now reprogrammable, meaning people can use them on any cryptocurrency, no matter the hashing algorithm. This is very expensive equipment and with market valuations so volatile, you can’t be sure you’ll even manage to cover your investment over time. Don’t forget the difference between growth and value in the crypto industry.
#2 Poor altcoins’ performance
Cryptocurrency investors had been focused on some of the most popular cryptocurrencies since the 2018 bear market occurred. Bitcoin had been the most favored by the flows, while Ether, Litecoin, and XRP had managed to consolidate their position behind Bitcoin. The poor altcoins’ performance had diminished the returns for small cryptocurrency miners. Unable to compete with large mining farms, their only choice was to focus on small altcoins. Although there are some tokens with huge potential, it’s hard to predict a strong rise in valuation.
#3 Increasing difficulty
Over time, the mining difficulty for each token increases, since there are a growing number of miners operating in a particular token. The increased difficulty is another big issue for small crypto miners and is another reason why crypto mining is no longer worth it. They’ll have to invest a lot of money for mining equipment and not even then things will become easier.
#4 Smaller rewards
Most of the cryptocurrencies go through what’s known as halvings, meaning the block rewards get cut into half once a few years or less. Combined with an increase in difficulty, the smaller reward is another roadblock for small cryptocurrency miners, since the competition becomes fierce. All miners must compete for a smaller number of tokens per block, diminishing the likelihood that an average miner will manage to earn something. Although halvings are good due to their deflationary pressure (contributing to the increase of market valuation), at the same time they contribute to a centralization of mining power in the hands of a few large companies.