Bitcoin mining is being cleared: some people are going overseas to survive, while others are preparing to buy at the bottom

"Miners and cryptocurrency practitioners no longer need to harbor any luck." Lv Bufan, a mining practitioner, told Bianniu.com: "The withdrawal of Bitcoin mining from China is a foregone conclusion. At present, anxiety, uneasiness and confusion may be the most common feelings of mining practitioners."

On June 18, the "Notice of the Sichuan Provincial Development and Reform Commission and the Sichuan Provincial Energy Bureau on Cleaning Up and Shutting Down Virtual Currency "Mining" Projects" issued by the Sichuan Provincial Development and Reform Commission and the Sichuan Provincial Energy Bureau was widely circulated on the Internet.

The document requires the completion of the screening and closure of key targets, and the screening, cleaning and closure of the 26 virtual currency "mining" projects that have been investigated and reported by the State Grid Sichuan Electric Power Company must be completed before June 20. At the same time, it requires power generation companies to conduct self-inspection and self-correction, and to do a comprehensive cleanup and investigation, and report the self-inspection, cleanup and rectification and cleanup and closure before June 25.

In the early morning of June 20, all Bitcoin and other virtual currency mining farms in Sichuan Province were collectively cut off from power, and the mining machines were forced to shut down. Miner Zhou Yi believes that the power outage at this time is a fatal blow. Sichuan is currently in the flood season, which is the lowest mining cost of the year. "During the flood season, there is abundant rainfall, so the electricity price is relatively cheap. For mining farms, the electricity price is an important factor in determining the subsequent mining income, so many mining farm owners are still waiting and watching."

However, stricter regulation followed.

On the evening of June 21, the People's Bank of China issued an announcement stating that it had summoned some banks and payment institutions including the Industrial and Commercial Bank of China, the Agricultural Bank of China, the China Construction Bank, the Postal Savings Bank of China, the Industrial Bank and Alipay to discuss the issue of banks and payment institutions providing services for virtual currency trading speculation.

"You know, trading and mining are the most important industrial links of virtual currency, and this move of cutting off the source of funds basically directly blocks the two major links. Many investors found out when they logged into the virtual currency trading platform that their bound bank accounts could not be used normally." Lu Bufan said.

The butterfly effect appeared one day after banks and payment institutions were summoned.

On the evening of June 22, virtual currencies collapsed across the board, with Bitcoin falling directly below the $30,000 mark to a low of $28,800, the first time since January 2, 2021. The trends of virtual currencies such as Ethereum and Litecoin were also not optimistic, with Ethereum falling by more than 13% and Litecoin falling by more than 20%. Data from Binance Exchange showed that within 24 hours, a total of 206,000 people had their positions liquidated, with the amount of liquidation reaching $806 million, of which the highest single liquidation was worth $5.3988 million.

"Government documents from all regions have been issued. Mining farms are having a hard time operating under strict supervision. They can only close down and find another way out," Lv Bufan told Bianniu.com. "It is no exaggeration to say that with mining and cryptocurrency speculation banned, both the mining and cryptocurrency circles have entered a cold winter."

Mines are being cleared across the country, and the "mining era" has come to an end

In the mining circle, a consensus is rapidly forming that virtual currency mining is completely shut down and coming to an end.

Zhou Yibi had expected this, "In fact, there were signs that virtual currency mining farms in Sichuan were collectively cut off from power a long time ago. Before that, regulatory crackdowns from all over the country had already fallen like raindrops, but I didn't expect it to come so soon."

In the past month, governments at all levels have begun to intensively release regulatory policies on virtual currency mining.

On May 18, the Inner Mongolia Development and Reform Commission established a reporting platform for virtual currency "mining" companies; on the same day, the China Internet Finance Association, the China Banking Association, and the China Payment and Clearing Association issued an "Announcement on Preventing the Risk of Virtual Currency Trading Speculation"; on May 21, the State Council Financial Committee called for a crackdown on Bitcoin mining and trading, and resolutely prevented individual risks from being transmitted to the social field; on May 26, the Inner Mongolia Development and Reform Commission issued a solicitation of opinions on eight measures to resolutely crack down on and punish virtual currency "mining" behavior; on June 9, the Qinghai Provincial Department of Industry and Information Technology required a cleanup and rectification, strictly prohibiting all regions from setting up projects and approving all types of virtual currency "mining" projects, and completely shutting down all existing virtual currency "mining" projects; on June 12, a person from the Yunnan Provincial Energy Bureau Office confirmed that according to the requirements of the notice, various electricity-consuming departments were promptly organized to carry out joint inspections, and the cleanup and rectification of electricity consumption of Bitcoin mining companies was completed by the end of June this year; immediately afterwards, the Sichuan Provincial Development and Reform Commission and the Energy Bureau took further severe measures against mining behavior, directly cutting off the power supply to the mine.

Not only that, even major mainstream websites have blocked keywords such as "Binance, Huobi, OKEx", and searching on Baidu and Weibo will get results such as "Results not displayed" and "Sorry, no relevant web pages found".

"This time it can be said that it is a complete farewell." Zhou Yi told "Bianniushi", "Before, many mine owners still held on to their luck, but now they have given up."

Governments across the country have been clearing out virtual currency mines one after another, with one major reason behind this being the extremely huge energy consumption of mining.

In the global distribution of Bitcoin computing power, China ranks first with 65.08% of computing power, far exceeding the United States, which ranks second but has only 7.24% of computing power. According to CCTV News, in China, the top four provinces and regions in terms of computing power distribution are all located in the west: Xinjiang, Sichuan, Inner Mongolia, and Yunnan. Among them, Sichuan is the largest gathering place for miners in China and even in the world.

In fact, having 65.08% of the computing power comes at the cost of huge energy consumption. According to research data from the University of Cambridge, as of May 10, 2021, the annual electricity consumption of global Bitcoin mining is about 149.37 terawatt hours. This figure has exceeded the electricity consumption of Malaysia, Ukraine, and Sweden, and is very close to Vietnam, which ranks 25th in electricity consumption. Mining not only consumes a lot of electricity, but also increases carbon dioxide emissions. Last year, the 69 million tons of carbon dioxide generated by mining accounted for 1% of global emissions, which can raise global temperatures by 2°C within 20 years.

"In addition to being contrary to carbon peak and carbon neutrality, the deeper reason is that virtual currency is unregulated, which is equivalent to being in an unregulated gray area, and is therefore more prone to financial risks," explained Lu Bufan.

On May 18, the Internet Finance Association, the Banking Association and the Payment and Clearing Association jointly issued an announcement to warn of the risks of virtual currency trading speculation. Three days later, the Financial Stability and Development Committee of the State Council issued a document stating that it would crack down on Bitcoin mining and trading activities and resolutely prevent individual risks from spreading to the social field.

In Lu Bufan's view, as the State Council and local governments' crackdown efforts intensify, it is only a matter of time before mines everywhere are completely cleared out, and "the era of mining has come to an end."

Going out to sea to survive, Chinese miners are forced to wander around the world

There is actually not much time left for mine owners to hesitate and wait and see. There are usually two paths before them: one is to sell the mining machines at a low price and find another way out; the other is to go out to sea to survive and give it a try.

There are quite a few mining owners who choose the first path. One thing that can prove this is that a large number of second-hand mining machines are flooding into the market, causing the prices of mining machines to plummet. "Take the Ant S19 for example. It was once sold for 70,000 yuan. Now a second-hand mining machine only costs more than 20,000 yuan. If the demand is high, it can even be bought for more than 10,000 yuan." Zhou Yi said.

“For some small and medium-sized mines, due to limited costs and resources, they may be able to bear the losses and leave, but it is difficult for large mines with tens of thousands of mining machines to leave. Therefore, going overseas to survive has become the only and necessary way to go,” said Lu Bufan.

The revenue of mining farms mainly comes from two aspects: one is self-owned mining, that is, the mine owner purchases mining machines for mining; the other is to provide hosting services to users and then earn the difference in electricity prices. But no matter which aspect, electricity prices are the top priority. "Although mining machines are expensive, in fact, the biggest cost expenditure is not mining machines but electricity prices." Lv Bufan said, "To a large extent, the low cost of electricity is an important reason why China has 65% of the world's computing power."

In Lv Bufan's opinion, the technical barriers to operating a mine are not high, but the difficulty lies in how to choose a site, and the site selection must consider whether transportation is convenient, the price of electricity, and whether a stable power supply can be guaranteed in the later stage. Therefore, Central Asian countries and parts of the United States, where electricity prices are relatively low, policies are standardized, and mining is welcome, have become the primary considerations for some large mines.

"Many mining farm owners are optimistic about Texas, the biggest attraction of which is its abundant and cheap electricity resources." Zhou Yi told Bianniu.com, "Texas's cheap electricity prices are due to its perfect renewable energy infrastructure. 20% of the local electricity comes from wind power, and the local government supports cryptocurrency mining. Therefore, it is indeed a good choice for mining farm owners who want to go overseas."

At the same time, some regions with relatively loose regulation on virtual currency mining have also extended olive branches to Chinese mine owners.

Arman Batayev, deputy director of the investment department of AIFC (Asta International Financial Center) in Kazakhstan, said: "Kazakhstan can provide compliant legal protection and low electricity costs. Small and medium-sized miners in China can cooperate with enterprises in the country and send mining machines to Kazakhstan for hosting."

According to CNBC, Miami Mayor Francis Suarez also said that Miami's door is open to Chinese Bitcoin miners. He also said that he has not received any calls from Chinese miners, but hopes to accommodate these scattered miners by promoting the city's almost unlimited and cheap nuclear energy supply.

On the surface, whether in terms of policies or electricity prices, many countries and regions seem to be ideal places for virtual currency mining, but in fact, it is not easy for large-scale mining farms to go overseas. One example that can be cited is that in foreign countries, the replacement and supply of mining machine parts are far less convenient than in China. According to Lv Bufan, in some Southeast Asian countries, due to the lack of professional mining machine maintenance teams, the maintenance costs and downtime losses of mining machines are almost two to three times that of domestic ones, which directly leads to a surge in operating costs.

"But no matter what, for those mine owners who want to continue mining and making money, going to sea is a foregone conclusion. Now it is just a matter of when and where to go," said Lu Bufan.

After clearing out the mining farms, has the graphics card shortage problem been solved?

With the sharp drop in virtual currency prices and local governments' comprehensive crackdown on virtual currency mining activities, the graphics card market, which had previously seen soaring prices due to frantic buying by miners, has begun to cool down.

On June 20, according to the Daily Economic News, in Shenzhen Huaqiangbei, the price of graphics cards has loosened, and Nvidia RTX3070 and RTX3080 have dropped by thousands of yuan. A stall owner said that before, when miners came to buy graphics cards, they usually bought dozens or hundreds of graphics cards, but now there are fewer miners coming to buy, and the price of graphics cards has also dropped a lot.

Just a month ago, the graphics card market was in a state of "hard to come by".

Take the RTX3080 graphics card released by NVIDIA in October last year with an official website price of 5,499 yuan as an example. In January this year, the wholesale price of the RTX3080 graphics card rose to more than 8,000 yuan. Later, due to the shortage of brand-new graphics cards, the second-hand price of the RTX3080 graphics card rose to 12,000 yuan in March, and then soared to 17,000 yuan in April. After June, the latest quotation for this model of graphics card has fallen to 11,000 yuan.

Not only are the prices of second-hand graphics cards falling, but the prices of new graphics cards have also fallen. On e-commerce platforms such as JD.com, the Colorful RTX 3060 Tomahawk 12G was priced at 6,499 yuan on June 1, but as of the time of publication of "Bianniushi", its price has dropped to 5,399 yuan.

"Second-hand graphics cards have now entered the market, which will have a certain impact on the graphics card industry. It is estimated that it will not be long before graphics card prices will plummet." Zhou Yi predicted.

A stall owner in a computer mall in a third-tier city in Shandong Province disagrees with this prediction. He believes that the future price trend of graphics cards is still unclear. "Graphics card prices are relatively much cheaper now, but they are still expensive compared to last year. Moreover, graphics card prices change every day, and it is hard to say what they will be like tomorrow." He then added, "There is not much room for graphics card prices to continue to fall. There is a global shortage of chips, and the problem of graphics card shortage cannot be solved for the time being, so it is difficult for prices to drop sharply."

An industry insider who wishes to remain anonymous told Bianniu.com that the influx of second-hand mining machines and graphics cards into the market may temporarily impact the prices of mining machines and graphics cards, but the impact is limited. "Not everyone sees a crisis. There are still many people who think that every Bitcoin mining disaster is a good opportunity to buy at the bottom," he said. "As far as I know, there are quite a few people who want to buy mining machines and graphics cards, and they have already prepared hundreds of millions of funds, just waiting to buy at the bottom."

(Note: At the request of the interviewees, all names in this article are pseudonyms.)

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