Going overseas, waiting, or transforming? Where will China's miners go after June 19?

As policies in Inner Mongolia, Xinjiang, and Yunnan were released one after another, Sichuan's policy finally came into effect on June 18. But what the outside world may not have expected is that Sichuan's policy is even more stringent, not only emphasizing "political stance", but also directly listing 26 large mines. The height of the intention and the details of the implementation in the document exceed those of other provinces.

The execution speed is also very fast. On June 19, major mining farms began to shut down, and the computing power of the entire network dropped sharply. According to BTC.com data, the 24-hour average value is close to 100E, which is nearly 40% lower than the highest point a month ago, close to the computing power after the halving in 2020. At that time, Bitcoin was less than 10,000 US dollars, and some mining machines were even mining at close to the shutdown price.

However, on the evening of the 19th, the price of Bitcoin did not fall but rose slightly, returning to 36,000 US dollars. This fully demonstrates that Bitcoin is now basically controlled by Wall Street, and is mainly affected by US monetary policy and the sentiment of Wall Street institutions, and has little to do with the mining industry.

So, where will Chinese miners go in the future?

First, is the choice of going overseas reliable?

Currently, large miners and mines are choosing to expand overseas, with the United States, Kazakhstan, Canada and Russia as the top four locations. The United States and Kazakhstan are the most active, with the mayor of Miami and the AIFC Development Zone in Kazakhstan even proactively calling for Chinese miners to join.

However, going overseas is currently only suitable for the medium- and long-term layout of large miners. The United States has a punitive tariff of up to 25%, and the infrastructure cost is 5-6 times that of China, and the electricity cost varies. For Miami, which called out to Chinese miners, the electricity cost is as high as 0.6 yuan, not including other taxes and fees. Kazakhstan and Russia have a poor economic environment, low goodwill, and are prone to unexpected risks; Canada, Northern Europe and other places have insufficient power facilities, mainly small and medium-sized hydropower stations below 100 megawatts.

After taking stock, we will find that there is actually no place that can perfectly suit and replace China when it comes to going overseas. The United States is still relatively suitable for large-scale mining farms. Wu Jihan (BitDeer), Wang Chun and other miners who gave up their fantasies early and started going overseas in 2017 can be said to have taken the lead in this wave. But they are only a minority.

Second, what will happen to the policy later?

Will such a strict policy continue? Is it temporary or long-term? At present, the situation this year is probably not optimistic. The big mining companies are tearing each other apart, and the problem of lack of communication between the industry association and the government has once again been highlighted. Whether it is the government, official media or public opinion, the mining industry is placed in an almost "unforgivable" position, while favorable arguments such as consuming abandoned electricity, helping poor areas with finance and employment, and dominance of Bitcoin computing power are difficult to enter the vision of decision makers and the mainstream.

From the perspective of the overall trend, this year is not optimistic, but it is hard to say what will happen next year. Because, to put it another way, Bitcoin and Bitcoin mining are not illegal in the current legal system, and do not involve high-risk crimes such as illegal fundraising in the crackdown on P2P.

There is a view that the Supreme Court will issue relevant judicial interpretations in the future, but the premise is to define Bitcoin as illegal, which is inconsistent with the current world trend. Therefore, the industry still has some hope and expectations for moderate relaxation in the future. In any case, there will be many festivals starting from next month, so under such circumstances, most miners will choose to comply. Sichuan also quickly shut down the machines. Let's see what happens after these few months.

Third, how will the miners decide?

Due to the skyrocketing price of coins in the past year, the shortage of chips, and the slow growth of computing power, most miners who have been holding mining machines or have entered the market in 2020 have actually made a lot of money and cannot complain or cry. Under such circumstances, large miners go overseas in groups, small miners sell their machines for transformation, or look for "home workshop-style" locations as Jiang Zhuoer said, which are all possible options.

The worst hit are probably the miners and some mine owners who entered the market this year. The least affected are probably the mining machine manufacturers. Coincidentally, Bitmain also held a new product launch conference in Chengdu on the 19th, launching the latest L7, D7 and water-cooled mining machines, because most of them may be sold directly to the United States where demand is strong.

Industry insiders believe that traditional miners should broaden their horizons. For example, Shenyu has transformed into the current leader of China's DeFi industry, and some miners have actively participated in emerging projects such as Filecoin and Chia, which are quite foresighted. In the final analysis, Bitcoin mining is only a small part of the crypto world. With the completion of Ethereum 1559 upgrade and 2.0, it has a broader world waiting for us to explore.