Given the close proximity of Hawking, how will the recent decline in bitcoin prices affect the work of large bitcoin miner? A report from the CoinDesk website answers that question.
Bitcoin’s fall last week casts a shadow on the future of mining companies, which have invested more than half a billion dollars over the past six months to get ready for Hawking.
The big bitcoin mining farms in three different countries, speaking to CoinDesk, point out that they have been diligent in upgrading their facilities since September, indicating their determination to survive long in the extractive industry.
Next May, the amount of newly extracted bitcoins that are mined once every ten minutes will be halved according to the bitcoin code, an event that could hit these companies hard. Given that many of the older mining machines are no longer profitable even before Hawking, mining companies have spent more than $ 5 million to purchase new, more efficient equipment that can produce more bitcoins with lower power consumption. .
But Bitcoin’s 50% drop last week to $ 5000 has questioned their profitability.
According to Poolin data, the daily gross profit of the strongest market extractors, such as Watts Miner M20S from MicroBt and Bitmine Ent Miner S17 Pro, is below 50%. This estimate is based on the price and hardness of the extraction (Bitcoin Mining Competition Measurement Scale) at present, at a cost of 5 cents per kWh. According to CoinDesk, at the current price, even the most powerful devices in the world are not profitable.
If bitcoin prices do not go higher after the Hawking event and half the extraction reward is halved, these companies will have to wait much longer for their capital return.
Zheng Xun, CEO of Hashage Mining, which operates in several cities in Sichuan, China’s mining company headquarters, said:
In the meantime, while buying new devices, we’ve been down and out. The size of our extraction farm is very convenient right now and we don’t need to buy more equipment. We are currently injecting cash into the farm to see what the market conditions will look like after Hawking.
However, it is not yet clear how Bitcoin’s overall processing power will respond in the coming weeks, with old mining equipment shutting down after hovering. If the mining and computing power of the bitcoin network is significantly reduced, these companies could also extract more units.
But now, since the fall of last week’s price, the 7-day moving average hash of the network has been declining and has fallen from 118 bps to 108 bps on March 9, which is not a significant amount.
Chris Zhu, a co-founder of Poolin, who spoke on a chat panel on WeChat on Friday, acknowledged that he had been expecting a slow hash rate before bitcoin fell. Increase. Now, after the price drop, he expects the network’s computing power to shrink by 20% up to 30% in the coming months.
Spillage for extraction machines
The usual overhead of mining companies to purchase new equipment can be seen in the dramatic increase in bitcoin’s overall computing power over the past half-year.
Since September 2019, the computing power (hash) of the Bitcoin network has grown by 30%, from 2 exa-hashes/s to about 90 exa-hashes/s.
Considering that the cost of new extraction equipment is estimated at between $20 and $30 per the second tra-hash, it shows us that extraction operators have spent more than $ 600 million in preparation for the upcoming Hawking event in recent months.
Artem Eremin, production manager at 3logic mining equipment sales company, says his clients in Russia and Central Asia have consistently been buying Bitmine S17 Ante Miner since October. Extraction Devices (ASICs) are devices with dedicated computer chips that are customized for heavy computing activities such as digital currency mining.
3logic sells about 2500 new monthly AICs. Ermin says statistics in October and November were up to 5000 units per month, but their purchase fever declined in December 2019. According to the latest estimates, it is likely that about one-third to one-half of Russia’s extraction equipment will be replaced with newer models.
Igor Runets, managing director of Bitriver’s Mining Equipment Store in Bratsk, Russia, says its customers have been buying ice cream since last fall, but sales declined in January.
The Chinese New Year followed by the outbreak of the Corona virus reduced our sales and then remained at the same level.
In China too, large farms have been extracting since the second half of the year 2019; immediately after their major launch by manufacturers of these machines, they have bought in large quantities.
Zheng says his company has been developing 30% of its facilities since late last summer with the latest Bitmin and MicroBT and is set to launch before the end of the Chinese New Year.
Some, like Gabriel Xia, of Spark Capital, a Chinese venture capital firm, has begun replacing and updating work early in the summer.
We sold all our S9s in the summer of last year as our second-hand models doubled in price and started buying new equipment.
The more robust the extraction industry
Behind the fever of mining machines, there is a lot of capital that only entered Bitcoin mining in the year 2019.
For the first time in February 2016, Bitcoin’s processing capacity was down to 1 exahashes/s, and to bumps to 50 exahashes/s in September 2018; and even after the 2020 uptrend of the Year 2017, it took thirty months, but the bitcoin network was able to do so. To double within 15 months and in January of this year.
This rapid growth was made possible by major manufacturers such as Bitmine, Canan and MicroBt, and the supply of more powerful extraction equipment and more advanced computing chips.
But technical improvements also mean more expensive ones. The mining industry has been Consolidation and expanding small miners since the beginning of the year 2017.
It was not uncommon to see a $ 15 million order for extraction equipment in the year 2017, and even during that year’s bullish market, but that changed to the year 2019.
Zia, whose company also has a year-long 2016 mining experience, says:
A $ 15 million order a year 2017 could make you the biggest Bitcoin network miner, but a 2019 year order only means you’re one of dozens of big customers in the market.
The usual tradition of the industry is that extractive farms sell newly extracted bitcoins to cover their operating costs, but in the last few years, a new market has emerged for financial services companies to help them access working capital. , Even if they intend to maintain it.
Xia says the assets extracted by Spark Capital have been pledged as collateral for the loan we received to pay bills and expand operations. The company thinks it will be able to sell these coins later at a higher price while reducing the time needed to return equipment purchase capital.
Our look at this is a long-term one, and it is at a time when our company is (well) developed.
Dmitry Uzersky, CEO of Electro.Farm, an active extraction farm in Kazakhstan, says that 90% of his customers do not sell their quails periodically and are expecting sudden price jumps.
Some have sold their coins for $ 12000 and now they are expecting the price to rise to over $ 10,000 again.
Cynthia Wu, deputy head of Matrixport, a subsidiary of Bitmine Financial Services, says her company now provides services to more than 200 large farms and more than $ 100 million in deferred loans (unpaid loans). Most of them have been received by a miner with the aim of paying for electricity bills and building new extraction facilities.
But the danger that threatens to coincide with a 50% drop in Bitcoin prices in just two days is the automatic confiscation of their bail.
With borrowers whose mandatory bail rates are on average 60 to 70%, the borrower or entity will be at risk of forced foreclosure of its mortgage bitcoin if it fails to increase its bail, if the bitcoin price is still high. It was at its peak at $ 11000, not half its value now.
Unwilling to sell
In the US, most miners sell their bitcoins because they need cash, but most Chinese miner are long-term holders with little desire to sell. The common thought of Chinese miner is to never spend more than you extract.
Sharifullah Yarov, head of business at Matrix Port, says that the industry’s oldies who have been active since the year 2012 usually don’t rush to sell coins.
Newcomers are trying very quickly to convert coins into Fiat currency, but they have also been slow to criticize coins over time, observing the growth of digital currencies.
Ethan Vera, chief financial officer and co-founder of Luxor, says there are many miners looking to borrow, but they are usually industry-specific miners who have a very positive outlook. They do.
According to him, new miners are always looking for ways to withstand the effects of sudden price drops.
Many experts are currently entering the field in North America, most of whom have experience in investment banking, corporate finance and oil and gas companies. They are usually used to using financial tools as a way to reduce their business risk. My conversations with these major market minerals were aimed at finding ways to reduce the impact of Hash Wright’s value and bitcoin prices on their business.
Rontz and Azersky says:
They show little interest in derivative transactions, at least not in Russia.
Azerski says the futures market and digital currency trading have not yet matured. Miner has come into the game with the intention of taking advantage of these risks rather than paying to cover the risk.
But Wu says Matrix Port realized that some were interested in the company’s options for trading. About 70% of the platform’s 70,000 bitcoin holdings have been owned by major miners since its release in October.
In addition to speculation and profits, they want to be more protected from market movements.
Meanwhile, the latest large-scale farm extraction strategy for regeneration is tackling an old problem. What do they have to do with older mining equipment like the En Miner S9 and models like those that have had the mining market since the year 2017?
Will the bitcoin price drop below the $5000 range and the Hawking event leading well below the minimum price needed for their profit ($8000) will shut them off the network?
Everyone wants to get rid of the S9;
But he still believes that the S9 is not over yet. It all comes down to the miner strategy of extraction.
At Beaver River, which distributes 70 Megawatt of electricity to provide its customers with the power it needs, only about 25$ of the equipment is S9.
Those who were planning to sell them should have already done so.
Jia estimates Spark Capital, which has sold all of its S9s, estimates that the S9 series only provides 20% to 25% of the computing power of the bitcoin network.
Different people have different strategies, some wanting to replace the old EICS with the newer ones, and some tend to buy the old models at a low price, hoping to get the money back quickly.
Rondz adds that he thinks those who insist on using the S9 series will not turn them off even if these Icics are currently only able to pay for them.
No one will shut down their device until Hawking, and everybody is going to kill as much of the old AI as possible.
According to the extraction farms, it is possible for the S9 Mini Miner to reduce its power consumption from 1600 watts to 700 watts and continue to work at a slower speed Instead of 13 tra-hash, continued with 9 tra-hash rate.
Some extraction pools, such as Electro.Farm and Pollin, also offer users the option to increase their Quinn production by combining two S9 miner.
The idea of both approaches is to increase gross profit so that S9 Asics can earn at a modest average cost of 5 cents per kilowatt-day, albeit a modest one.
In addition, there are some people and small farms whose electricity is cheaper than large farms.
Mr. Zheng of Hashage, which specifically refers to the summer rainy season in China, following the May Hwing event:
Yes, if your power costs 2 cents you can still play with your S9s.
Ermin says Siberian residents can use even older S7 models by the end of February. Smaller miners, whose numbers are decreasing day by day, are still operating in Kazakhstan and in the breakaway regions of Abkhazia.
But there is another problem, as these old AICs take up a lot of space and their profits are low for farms, which typically pay per kilowatt-hour.
That’s why big farms are looking to replace old models with new ones.
Rontz says he is reluctant to turn off these old ASIs on his farm, so he is looking to temporarily keep his customers’ ASIs on.
In the end, these S17 and S19 bits are the bitmine, and the M20 and M30 are micro-BT that will replace the S9 series in the bitcoin processing cycle.
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