Is the price of cryptocurrencies a critical factor affecting mining and its profitability?

Most cryptocurrencies are issued or created through the process of mining. Cryptocurrency mining is the process by which a large number of computers, or other forms of hardware such as GPUs and ASIC miners, compete to solve complex mathematical problems in order to incorporate cryptocurrency transactions into blocks along the blockchain and confirm them. Computers are rewarded for the work they perform throughout the process of mining and receive newly formed coins. This process of transaction confirmation is the basis of a number of popular cryptocurrency blockchains, including Bitcoin, Ethereum, Bitcoin Cash, Ethereum, Monero, and Litecoin.

There are many factors affecting the overall profitability of mining, mainly the cost of electricity where the mining rig is installed. Other factors include the price of mined coin(s), network difficulty, and the cost of mining hardware, including CPUs, GPUs, ASICs, and cooling mechanisms.

When determining which coin will be the most profitable to mine, many focus on the price of the coin above all else. But one must also take into account the mining difficulty. Both of these factors are incredibly volatile and the balance between the two can change from day to day. A miner must take all of this into account when calculating the profitability of mining.

Cryptocurrency price vs network difficulty:

When the price of a cryptocurrency rises more people are interested in mining it. As more miners are added to the coin's network, the overall hash rate of the blockchain's network rises as well. In effect, the competition to solve the mathematical problems associated with the process of mining intensifies. This leads to a rise in the network difficulty of the blockchain network. As the network difficulty rises, mining becomes less profitable. In other words, the same hash rate will yield less coins than it previously did before the network difficulty increased.

Coins can undergo a certain amount of manipulation of difficulty. For instance, a group or mining concern may decide to concentrate their hash power on a specific coin to take advantage of an increase in value or other favorable conditions. Once this results in a spike in difficulty, they will often move on to the next coin.

Cryptocurrency mining vs graphics cards prices:

Cryptocurrency mining profitability significantly impacts the prices of graphics cards (GPUs), which are used to build most of today's cryptocurrency mining rigs. The price of graphics cards are closely related to the prices of cryptocurrencies. Throughout the past couple of years, whenever the prices of cryptocurrencies rose, the prices of most high end graphics cards, especially those popular among cryptocurrency miners, soared as well.

Toward the end of 2017, the price of most high end graphics cards skyrocketed. This was mainly due to the almost logarithmic rate of rise in the prices of a large number of cryptocurrencies. As the price of many coins soared, more and more people were enticed to start mining crypto, which led to an increased demand for high end graphics cards; thus, their prices skyrocketed in early 2018. For example, the price of a Radeon RX 580 graphics card rose from around $230 in May 2017 to around $550 in January 2018. Can you imagine? That's more than a 100% rise in the price of this GPU. Of course this increase in the price of graphics cards will lead to a decline in the miners' mining profitability.

Winminer's one-click software will automatically determine the best coins to mine to increase your mining profitability as per your hardware specifications, market prices, and the network difficulty of various coins.

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