New research by BitMEX has revealed that Bitcoin Cash SV (BSV) miners are losing hundreds of thousands of dollars every month. In total that’s led to more than $2.1 million in losses and due to recent news it looks like the situation is only going to get worse.
The Problem With Mining Bitcoin Cash SV
According to BitMEX research the total cost of mining Bitcoin cash SV, since its inception in November of 2018, has been $20,900,000. That’s the cost of electricity alone and does not account for the depreciation of mining gear or the opportunity cost of not mining more profitable chains like Bitcoin cash or Bitcoin.
To figure out the total losses it’s possible to multiply the number of coins mined since the fork, roughly 269,000, by the average sale price of Bitcoin cash SV which, apart from the price spike in April, has hugged resistance levels at $70. That amounts to $18,800,000 in proceeds which subtracted from $20,900,000 in costs gives a total loss of $2,100,000.
Taking into account Bitcoin Cash SV’s recent drop in the last day to roughly $60, we can expect revenue for BSV miners to drop by a proportional 14%, further increasing BSV miners’ loss per coin.
That being the case why would a miner choose to secure the SV network instead of using their ASICS on a more profitable chain like Bitcoin or Bitcoin Cash?
Principle Based Mining
It’s believed that a mining operation run by Calvin Ayre, a Canadian billionaire, accounts for a majority of the hashing power on the BCH SV network. That he’s choosing to mine an unprofitable coin may be due to ideology. Ayre has written, “Bitcoin SV is clear to massively scale in 2019, while still keeping the original Bitcoin base protocol stable.” Thus he clearly believes in the coin and its approach to scaling. As Ayre is already financially independent he can afford to mine at a loss in order to support a protocol that he has faith in.
That’s the altruistic take, however, there is another possibility: financial exposure. Ayre likely has a large stake in BCH SV and if that’s going to pay off he needs to keep the network secure. Future profits are most likely the motivating force for the rest of the miners as well. They might be willing to mine at a loss under the belief that BCH SV will appreciate significantly in the coming months and years, proportionally more than Bitcoin or Bitcoin cash. While the chances of that happening were always low, SV being the fork of a fork, they’ve been almost reduced to zero with the recent Binance delisting.
In a recent tweet CZ (the CEO of Binance) expressed his displeasure at Craig Wright (creator of Bitcoin cash SV) and said that if he didn’t stop claiming to be Satoshi he would delist SV from his exchange. A few days later he made good on the promise. That means that Bitcoin cash SV will only be available on second tier exchanges thus significantly reducing its liquidity and chances of mass adoption. As of publication BCH SV is down 8.88% in the last 24 hours, making it the largest loser out of the top 100 coins.
The Future of Mining for Bitcoin Cash SV
With the Binance delisting, decrease in revenue, and subsequent major loss of liquidity (Binance accounts for about 80% of all SV trading) it’s likely that miners are going to move away from the chain and start securing other networks. Those like Ayre who are motivated less by profit and more by ideology might continue to mine, however, as the promise of a large payday in the next bull market fades it’s likely that his mining operation will be one of the few large institutions supporting Bitcoin Cash SV.