Is GPU Mining Profitable In 2022?

Unfortunately, GPU mining is not as profitable as it was previously. Anybody who has been mining in 2022 has already felt the pinch. The difficulty appears to be rising and the price of ETH is plunging, coupled with many other factors.

One might be starting to wonder whether building a farm was worth it. However, the mining calculator says that you might still be in the green. Hence, you only need to HODL on and keep mining. Will everything be alright eventually? Unfortunately not.

Despite what your calculator and ETH wallet might be saying currently, you have been losing money each day that you have engaged in mining. Why? Hardware resale value.

GPU Mining Hardware Resale Value Market Volatility

As was stated previously, an honest ROI calculator should always consider the resale value. Between the pandemic-related supply shortages and the boom in crypto markets, the price of GPUs surged to abnormal highs in 2021. 5-year-old GPUs that cost $200 when new were now selling for $600+.

You may have even acquired some of them yourself. Sadly, what goes up must always come down later, and the higher it goes, the further it will eventually drop. The great unwinding of GPU prices started in earnest in early 2022 and it has been quite relentless ever since.

Mining Calculators Contain A Hardware Resale Value Blindspot

The secret that no GPU mining calculator can tell you is that eventually, the amount of cryptocurrency that you are mining is not compensating for the resale value you are losing currently. The price of GPUs has been plunging on average of 3% per week since the start of the year and has recently increased to around 5% per week now that most miners are beginning to struggle to even cover electricity costs.

This scenario creates a negative feedback loop that depletes the demand from the miners to buy GPUs and increases the supply from miners who sell GPUs. Normally, when the supply goes up and demands decrease, the price goes down.

For now, gamers are still a reliable source of demand. But, when looking at it from the point of view of a gamer, why acquire a GPU today while it will be 20% cheaper in a month? Therefore, even gamer demand is significantly thin today. General sales volumes on online marketplaces have now become relatively weak, further accelerating the plunge.

Hardware Value versus Mining Profit Comparison

First, let us take a sample of several popular mining GPUs from various sections of the market. These GPU mining tools are representative of the wider market trend – no GPU managed to escape the steep decline in prices:

There is no appealing way to put this – GPU resale value has deteriorated over the last several months. This data is acquired from public sources (mainly eBay sales data, getting rid of obvious scams). However, the trend seems to agree with that of other sources.

Sadly, the world does not care that you had paid over $3,000 for an RTX 3090 in 2021. The cold unappealing reality for you is that many other people are ready to sell them for far less today, and the market has determined that they are now worth $1,316 on average. By the time the year ends, the value might even be lower.

But since you may have been mining continuously, it might help in compensating for the loss in resale value and much more. This chart represents what every GPU mining equipment would have returned after electricity costs at about 10c/kWh on average in case you sold your mined crypto weekly for USD in 2022:

Mining revenue per GPU model.

That is something. However, when brought together, you can see that it did not even come close to compensating for the resale value loss:

In case you mined and held your ETH instead because the price of ETH has dropped by -50% YTD as of this writing, the situation might even be worse:

Mining revenue, by GPU model, hodl all the ETH

Mining revenue per every GPU model, hodl ETH, which would account for lost resale value.

GPU Mining Has Been Down All Of 2022

The hard reality is that in case you sold all of your GPUs on January 1, 2022, and only sat on the cash, the total value of your mining investment would be significantly higher than if you decided to hold on and mine throughout the price crash.

In case you mine as a hobby, this is not the end of the world. You can make a great case that resale value is not a major factor since you are not fully in this for the money. That sounds fair. Nonetheless, in case you are GPU mining as a business, there is no way you will justify continuing mining under the current conditions.

Although your P&L might still be looking healthy, your balance sheet is getting destroyed continuously. The business of GPU mining is unique in that all the miners fail or succeed together – and all miners seem to be failing currently.

No successful business engages in activities and operations that make it lose money. Looking at the big picture, it appears to be what happened to all miners in 2022.

What Does The Future Hold?

Normally, there is no crystal ball. Hence, we cannot predict the future with certainty. But from some point of view, GPU prices have some room left to drop. 5-year-old GPUs are currently selling near MSRP and miles above historical bear market levels.

Previously, we have seen RX 580s sell for as little as $120 on average – and that was around 3 years ago, after a significantly smaller bubble. Prices will not go down forever before gamers begin scrambling to get every available GPU. Nevertheless, it is reasonable to think that they can still drop another 60-80%.

The next generation of GPUs will come out in the next few months, and the Merge is expected to put a flood of millions of GPUs into the secondary market that normally just pushes 200K units annually. It might be unimaginable to see RTX 3090s selling for $500 or less. But, that is a highly realistic scenario according to the supply/demand dynamics at play in the current market.

What Do You Do Now?

Keep Mining

For this option to work, there needs to be a dramatic surge in the price of ETH and the Merge would have to be delayed for many more months. The market has already witnessed short-term spikes in the price of ETH and it never even moved the needle on resale value.

The price growth has to be extreme and sustainable for it to turn the trend around – in this case, we are talking about $6-10K ETH for the rest of 2022. Is that even possible? We do not believe so. But, this is crypto and anything can happen at any time. But it now begs the question: in case your strategy is reliant on the price of ETH exploding, could mining be the perfect way to play that?

Sell Your GPUs And Acquire ETH

In case the pride of ETH does a 3-5x surge from here, you would still be far better selling your GPUs now and purchasing Ether. The only real benefit that is in favor here is that you can lose less versus selling if the price of Ether continues dropping, but it is almost impossible to see a scenario where it still does not involve some kind of loss.

But in case you are confident that ETH will continue rising in price and you are ready to bet on that, selling your GPUs and acquiring ETH is an ideal way to capitalize on this prediction.

Cut Losses And Sell Everything

If you are not sure that the price of Ether will continue rising, just sell your GPUs now and hold onto the cash that you get from that sale. If you enjoy GPU mining, nothing stops you from keeping a few rigs operational, just for fun.

But since the price of GPUs might continue dropping and the mining profits are not compensating for these losses, at least you can stop bleeding and hopefully live to mine another day.

Sell GPUs, Hold Rigs, Purchase 2-4X The Hashpower Later

For the dedicated miners, that complex strategy hedges near-term risk. In case mining accelerates once more, it magnifies long-term gains. This is how most experienced miners have managed to play the bear cycles previously.

A majority of the non-GPU components like CPUs are not losing their value dramatically. Hence, if you decided to sell all your GPUs in January and purchased them all back now, you would be here with a net loss of zero dollars and double the hashrate.

That is notably far superior to mining and holding, and analysts do not think that you have missed the boat on this method yet – you can still sell today and possibly quadruple your hashrate in the next 6-12 months at zero net cost. This seems to be the best strategy for dedicated miners.