The cryptocurrency world was shaken up this Black Monday, but not all in despair; Kaspa (KAS) managed to flip the script with a surprising 7% surge, pushing the price above the $0.063 mark. This resilience underscores the strength and support from its global community.
However, not all news is rosy for Kaspa. A well-known YouTuber with over 100K subscribers, Sebs, has recently shed light on a critical issue plaguing Kaspa’s mining sector in a video that quickly went viral.
Mining Profitability Challenges
Sebs’ analysis reveals a stark contrast to the initial mining boom Kaspa experienced. The coin’s mining profitability has significantly dwindled, primarily due to a combination of declining prices and an unconventional 5% monthly emission reduction, which systematically decreases mining rewards. This policy has led to a drop in network hash rate as miners find it increasingly unprofitable to continue.
The prompt for Sebs’ critique? The push by Kaspa ASIC manufacturers for newer models which, according to his calculations, do not break even in a practical timeframe. His aim was to bring factual clarity to the situation with real-world data rather than speculative opinions.
Sebs also suggests alternative mining options, pointing towards ALO miners, Alphaex DG Home 1 for Dogecoin and Litecoin, and the Ipolo Series for Ethereum Classic as better investments for small-scale miners due to their efficiency and compatibility with residential power grids.
Crunching the Numbers
Using a year’s worth of data and analysis, Sebs dives deep into the economics of the new IceRiver KS7 and KS7 Lite miners. Here’s what he found:
- At $0.15/kWh: Profitability remains elusive.
- At $0.10/kWh: Miners might see profit for a brief 4-month window.
- At $0.05/kWh: Even after two years, the KS7 Lite would still be down around $800, while the KS7 would be approximately $3,500 in the red.
Sebs’ insight is that under these conditions, even if Kaspa’s price were to triple, mining would still lag far behind in profitability compared to direct coin investment. An initial $1,400 investment could theoretically triple to $2,800, whereas mining the same amount would only net about $32.
The crux of the problem is Kaspa’s emission reduction policy. This unique monetary policy design leads to a constant decrease in available rewards, making long-term mining profitability an uphill battle, resulting in what Sebs dubs “the moving target problem” – each successive miner from now will mine fewer coins than those before under the same conditions.
He points out potential benefits for some miners in terms of tax advantages, but for retail investors not looking to leverage such benefits, purchasing coins might be the financially smarter move.
The analysis paints a clear picture: Kaspa’s mining might be in a crisis, with its monetary policy at the heart of the issue, pushing miners to maximize profits in a narrowing window of opportunity, and even then, the numbers don’t look promising unless backed by exceptionally cheap electricity or a significant price surge.
Read also: AI Predictions for Kaspa in 2025
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Source: captainaltcoin.com