This is an off topic post but have been asked this question several times. First of all a quick disclaimer, the information provided below is based on my own personal opinions and research and should be followed at your own risk.
There are only a few things to consider when evaluating whether you will make money out of your BitCoin miner.
All variables need to be taken into consideration together and not observed alone. Do not fall into the trap of trying to oversimplify things. All the variables are generally readily available and except for BitCoin difficulty and BitCoin Price are reasonably easy to estimate.
Initial Cost: This is the price you paid for your BitCoin Miner and any other setup costs including PSUs, rewiring etc etc
BitCoin Difficulty: This is a variable in which it determines how hard it is to mine BitCoin. BitCoin difficulty adjusts itself roughly every 2 weeks (to be more accurate it adjusts itself every 2016 blocks with each block taking about 10 minutes). If more people mine, the BitCoin difficulty goes up and vice versa. Estimating BitCoin difficulty is hard but it’s perhaps the biggest make or break in mining and it’s also hard to calculate an average.
In the past one year, BitCoin difficulty has always increased with figures from as low as 11.39% to as high as 46.02% in October 2013! This is super important for in a situation where the increase is so high, in a scenario where you’re getting 1 BTC a week with your machine, with a difficulty increase of 46.02% you will only get about half of the BTC of what you got with the next difficulty change.
A lot of things effect BitCoin difficulty but the main ones are
Date in which you start mining: This is related to BitCoin difficulty. This may seem obvious but many people often forget that you only start getting returns when you start mining. This is especially important when purchasing miners on pre-order since you may only begin mining several months from when you purchased the miner (which is why I personally recommend only going for miners which are in stock or are in a ready to ship state). The general rule of thumb is that the later you start mining, the less BTC you will generate due to the increasing BitCoin difficulty. Many BitCoin miner manufacturers will take this into account into their pricing and you’ll find that a particular miner’s price will fall as time passes. Some BitCoin miner manufacturers don’t do this and in such cases you most likely will be overpaying for a machine (unless the price is so attractive to begin with).
BitCoin Price: This is the current value of BitCoin in terms of fiat money (USD, MYR, etc etc). In general if BitCoin prices increases against the fiat money, then you will be gaining and if BitCoin prices falls against the fiat money, then you are losing (but only on this variable). First of all it’s important for you to choose which currency you’re going to use as your base currency to determine if you’re making a profit or not. For most people, this would be the currency of the country in which you reside in which would be a fiat money (such as MYR or USD). This will help calculate your ROI in fiat money terms (for e.g. I put in RM1, once I mine do I get more or less than RM1?).
However another way to look at this is calculating your ROI in BitCoin terms. This is because if you are only making money because of BitCoin price increase, then it most likely would be more efficient and profitable if you just directly went to an exchange and bought BTC with your fiat money. Furthermore, some miner suppliers only accept BTC as payment (for e.g. Bitmaintech). So you need to calculate whether you’re getting more BTC than what you’re putting in! You may be getting a ROI based on fiat money but losing in BTC terms! Best would be an illustration.
Let’s assume a miner costs 1 BTC and the current price of a BitCoin is RM1000 (just for illustration). So unless you have existing BitCoin lying around, you will pay RM1000 for the 1 BTC and then get the miner. During the life of the miner (the life in which the money you’re making from generating BitCoins is higher than your running costs such as electricity), it generates 0.75 BTC only. Therefore in BTC terms you have made a loss. However at that time BitCoin has risen in price to RM2000 a BitCoin! So 0.75 BTC is now worth RM1,500! Therefore in fiat terms, you have made RM500 but in BTC terms you have lost 0.25 BTC.
In the above scenario, it would have made more sense for you to just buy the 1 BitCoin and just kept it instead of buying the miner! If you had just kept the 1 BTC and did nothing with it, you will have earned RM1000 instead of only RM500. The purpose of mining if you’re doing it for investment is to try to make more money in BTC terms or else it’ll always be cheaper to buy directly from an exchange. To rephrase, if by your calculations you are not making a ROI in BTC terms but only in fiat terms, it would be better to just use your money to buy BTC off an exchange as opposed to mining.
Running costs: This includes power consumed by your BitCoin miner and any additional cooling such as air-conditioning. You can calculate your rates from your local utilities provider. In Kuala Lumpur as at the time of writing it’s approximately RM0.38/kwh and in Sarawak it’s RM0.30-0.33/kwh. Most reputable BitCoin miners will specify the power draw of the miner.
Residential electricity rates in Malaysia are available below:
Estimated Uptime: You will need to make a certain provision for downtime due to hardware failures, electricity blackouts and other unforseen circumstances. Some miners need to be power cycled every now and then.
Pool Fees: Depending on which pool you use, you may be charged pool fees usually ranging from 0-2%. Some pools might claim 0% fees but secretly skim off the top so be careful! I would recommend either using one of the established pools such as Slush or BTC Guild but the best would always be P2Pool (if your miner supports it).
I personally use BitCoin Wisdom’s calculator which takes into account all the important variables and even allows you to calculate ROI in terms of BTC or fiat. Hopefully with the above knowledge, you can make an educated guess as to your returns from mining. Mining is speculation, but don’t speculate blindly!