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Is GPU mining profitable in 2022? No, not even close [math]

GPU Mining profitability in 2022

Anyone who has been mining in 2022 has felt the pinch. Difficulty is rising and the price of ETH is dropping, among other things. You might be starting to wonder if building that farm was worth it. But the mining calculator says you’re still in the green, so as you just hodl on and keep mining, everything will be okay in the end, right? Unfortunately not – despite what the calculator and your ETH wallet say, you’ve been losing money every day you’ve been mining. Why? Hardware resale value.

GPU mining hardware resale value volatility

As we said in a previous article, a truly honest ROI calculator should always take resale value into account. Between the pandemic-related supply shortages and the boom in crypto, the price of GPUs rose to the stratosphere in 2021. 5-year-old GPUs that cost $200 new were regularly selling for $600+. You may have even bought some of them yourself. Unfortunately, what goes up must come down, and the higher it goes, the further it must fall. The great unwinding of GPU prices began in earnest in early 2022 and it has been relentless ever since.

Mining calculators have a hardware resale value blindspot

The secret that no mining calculator can tell you is that at the end of the day, the amount of crypto you’re mining isn’t compensating for the amount of resale value you’re losing right now. The price of GPUs has been dropping on average ~3% a week since the beginning of the year and has recently accelerated to ~5%/week now that many miners are starting to struggle to even cover electricity costs. This creates a negative feedback loop that depletes the demand from miners to purchase GPUs and increases the supply from miners selling GPUs. Naturally, when supply goes up and demand goes down, price goes down. Gamers are still a reliable source of demand, but look at it from the perspective of a gamer – why buy a GPU today when it’ll be 20% cheaper in a month? So even gamer demand is thin right now. Overall sales volumes on online marketplaces have become relatively weak, further accelerating the decline.

Hardware value vs mining profit comparison

Let’s put this into perspective with some real numbers. First, let’s take a sample of a few popular mining GPUs from different segments of the market. These GPUs are representative of the broader market trend – no GPU has escaped this dramatic decline in prices:

Average Selling Price (Used)1/2/20222/6/20223/6/20224/3/20225/8/2022
RX 580 8GB$403$327$300$267$215
RX 5700XT 8GB$827$719$607$549$448
RTX 3090$2,412$2,188$1,913$1,627$1,316
Change in Resale Value 1/2/2022 – 5/8/2022  
RX 580 8GB-$188
RX 5700XT 8GB-$379
RTX 3090-$1,096

There’s no nice way to put this – GPU resale value has been decimated over the course of the last few months. We pull our data from public sources (particularly eBay sales data, filtering out obvious scams), but you can see this trend corroborated by other sources. Unfortunately, the world doesn’t care that you paid $3000+ for an RTX 3090 in 2021 – the cold hard reality is that a lot of other people are willing to sell them for far less nowadays, and the market has determined that they are now worth $1,316 on average. By the time you read this, it’ll probably be even lower.

But you’ve been mining all along, so ideally that would compensate for the loss in resale value and more. The following chart represents what each GPU would have returned after electricity costs at the average 10c/kwh if you sold your mined weekly for USD in 2022:

Total Profit @ .10c/kwh (Sell mining revenue for USD weekly)
RX 580 8GB$122
RX 5700XT 8GB$248
RTX 3090$501
Mining revenue, by GPU model

That isn’t nothing, but bringing it all together, you can clearly see that it didn’t even come close to compensating for resale value loss:

Net Gain/Loss 1/2-5/8  (Sell mining revenue for USD Weekly)
RX 580 8GB-$66
RX 5700XT 8GB-$131
RTX 3090-$595
Mining revenue, by GPU model, accounting for lost resale value

If you mined and held your ETH instead since the price of ETH is down -50% YTD as of this writing, the situation is even worse:

Total Profit @ .10c/kwh(Mine and Hold)
RX 580 8GB$61
RX 5700XT 8GB$125
RTX 3090$253
Mining revenue, by GPU model, hodl ETH
Net Gain/Loss 1/2-5/8(Mine and Hold)  
RX 580 8GB-$127
RX 5700XT 8GB-$254
RTX 3090-$843
Mining revenue by GPU model, hodl ETH, accounting for lost resale value

GPU mining has been in the red all of 2022

The cold hard reality is that if you sold all of your GPUs on Jan 1st, 2022, and just sat on the cash, the total value of your mining investment would be higher than if you held on and mined throughout the price crash.

If you’re a hobbyist miner, this isn’t the end of the world – you could make a good case that resale value isn’t a major factor because you’re not entirely in this for the money. That’s fair. However, if you’re mining as a business, there is no way to justify continuing to mine under these conditions. Even if your P&L still looks healthy, your balance sheet is being destroyed. The business of mining is unique in that all miners succeed or fail together – and all miners are failing right now. No successful business is in the business of losing money and, looking at the big picture, that is categorically what happened to every miner in 2022.

So, what does the future look like?

Naturally, we don’t have a crystal ball so we cannot predict anything with certainty – but from our perspective, GPU prices still have quite a bit of room left to fall. 5-year-old GPUs are still selling near MSRP and well above historical bear market levels. In the past, we’ve seen RX 580s sell for as little as $120 on average – and that was 3-4 years ago, after a much smaller bubble. Prices can’t go down forever before gamers start snapping up every GPU, but it’s reasonable to believe that they can still go down another 60-80%. The next generation of GPUs is coming out in the next few months, and the merge is going to put a flood of millions of GPUs into the secondary market that typically only pushes 200K units per year. I know it’s hard to imagine RTX 3090s selling for $500 or less, but that is a very realistic probability based on the supply/demand dynamics at play here.

So where do we go from here?

Option #1: Just keep mining.

For this strategy to be successful, there would need to be a dramatic rise in the price of ETH and the merge would need to be delayed for many more months. We’ve seen short-term spikes in the price of ETH and it didn’t even move the needle on resale value. The price growth needs to be extreme and lasting for it to turn the trend around – we’re talking $6-10K ETH for the rest of the year. Is that likely to happen? We don’t think so. But it’s crypto – anything can happen. But that begs the question: if your strategy is reliant on the price of ETH exploding, is mining really the best way to play that?

Option #2: Sell your GPUs now, and buy ETH.

If the price of ETH truly does 3-5x from here, you’re still going to do far better selling your GPUs today and buying ETH. The only real advantage in favor of mining here is that you can potentially lose less vs selling if the price of ETH continues to crash, but it’s hard to see a scenario where it still doesn’t involve a loss. But if you’re confident that ETH will continue to rise in price and you’re willing to bet on that, selling your GPUs and buying ETH is the better way to capitalize on that prediction.

Option #3: Cut your losses and sell it all.

If you don’t believe the price of ETH will continue to rise, simply selling your GPUs now and holding on to the cash is the right way to play this. If you truly enjoy mining, there’s nothing stopping you from keeping a rig or two for fun. But given that the price of GPUs is nearly certain to continue declining and the mining returns just aren’t compensating for that loss, at least you’ll be able to stop bleeding and hopefully live to mine another day.

Option #4: Sell the GPUs, hold the rigs, buy 2-4X the hashpower down the line.

For dedicated miners, this is a complex strategy that hedges short-term risk and if mining picks back up, magnifies long-term gains. This is how most experienced miners have played these cycles in the past. Most of your non-GPU components like CPUs are not decreasing dramatically in value. To put this into perspective, if you sold all your GPUs in January and bought them all back today, you’d be standing here today with a net loss of zero dollars and double the hashrate. That’s obviously far superior to mining and holding, and we don’t believe you’ve missed the boat on this strategy yet – you can still sell today and potentially quadruple your hashrate or more in 6-12 months at zero net cost. This is our favored strategy for dedicated miners.

Example from our own operation

Here at Bitpro, we practice what we preach. By mid-2021 our own mining farms had a maximum total hashpower of 80GH – roughly 5000 GPUs. Seeing that prices for GPUs had reached extreme and unsustainable levels, we made the decision to unwind our farms until the bubble unwinds, leaving only a few dozen GPUs still hashing for the free heat during the winter. By the time you read this, we will probably have zero hashpower.

Exit strategy – Sell your GPU mining hardware to Bitpro

At this point, we are 100% focused on assisting miners in their exit from GPU mining, temporarily or permanently. No matter the size or location of your farm, we can make a buyout offer and in most cases, pay and pick up in person for an easy, no-risk transaction. Our offers will be realistic and market-based – for better or worse. Even if you’re still on the fence, we can assist with up-to-date market valuations so you can time your exit appropriately.

We don’t know exactly what will happen post-merge – the plausible scenarios range from months of negative profitability to the end of GPU mining as we know it. We certainly hope that isn’t the case – but without Ethereum mining, 97% of GPU mining income will be wiped out and we see no positive outcome for anyone that tries to mine through that. We still look forward to a long and healthy future for GPU mining once the dust has settled. Contact us with questions or comments.