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The cryptocurrency market is once again in a frenzy. After breaking through $59,000 on the evening of March 13, setting a new record high, Bitcoin rose again to $60,000 and became a hot search on March 14, causing much discussion in the market. In addition to Bitcoin holders, the Bitcoin upstream industry "mining circle" is also in an extremely frenetic state. New mining machines are sold out, and second-hand machines are also snapped up in seconds. The mining industry is unprecedentedly hot under the surge in Bitcoin prices. However, in the view of industry insiders, under policy risks, it is still necessary to look at the mining business calmly. In the future, we must guard against multiple risks such as falling coin prices, reduced mining income, and excessively high Bitcoin acquisition costs.
96,700 Bitcoin users were "bloodbathed"
The price of Bitcoin has soared again. Starting from 18:00 on March 13, the price of Bitcoin rose in the short term. After breaking through the 59,000 US dollar mark, it stood at 60,000 US dollars at 20:00 on the same night. After a short-term correction, it rose to a maximum price of 61,750 US dollars (about 400,000 yuan) at 4:00 on March 14. As of 17:00 on March 14, the latest price of Bitcoin was 60,716 US dollars (about 395,000 yuan), an increase of 6.16% in the last 24 hours, with a turnover of 208.485 billion yuan and a market value of about 7.37 trillion yuan.
The price of Bitcoin has risen above $60,000. For a time, the entire cryptocurrency circle was in an uproar. Some coin holders expressed their likes on WeChat Moments and began to predict the next high. There were also many onlookers who bluntly expressed their incomprehension, questioning "how can a game with no value support become so crazy?"
"This round of Bitcoin bull market is the product of high inflation expectations." A senior analyst analyzed that when the 10-year US bond yield rose rapidly some time ago, the market believed that the Federal Reserve's monetary policy would change faster than expected, predicting that the Federal Reserve would reduce bond purchases in advance, and even the time for interest rate hikes would be brought forward. Against this background, both the stock market and Bitcoin plummeted. The recent rise in US stocks and Bitcoin is because the market has emerged from the haze of the previous period, and the market's expectations for medium- and long-term inflation have risen.
Financial technology expert Su Xiaorui told Beijing Business Daily that there are many reasons why Bitcoin rose above $60,000. First, many well-known institutions have recently held Bitcoin positions, which has boosted confidence in Bitcoin. Second, the United States has passed a fiscal stimulus bill, and the positive macroeconomic environment may also promote the rise in Bitcoin prices.
However, despite the rise in Bitcoin prices, investors still need to be highly vigilant about the risk of subsequent fluctuations. In Su Xiaorui's view, on the one hand, Bitcoin prices frequently experience a "roller coaster" state, which can easily lead to a liquidation situation; on the other hand, it also faces policy risks. Previously, some US officials have repeatedly pointed out that such cryptocurrencies are speculative assets and involve money laundering risks.
The price of Bitcoin has been on a roller coaster ride, which is obvious to all in the industry. In fact, in January 2021, driven by the increase in purchases by large institutional investors and the enthusiasm of retail investors, the price of Bitcoin hit new highs, but within just one day, Bitcoin began to plummet, with a daily drop of up to 19%; in addition, on March 12, the price of Bitcoin continued to rise, breaking through the $58,000 mark in the short term, but that night the price of Bitcoin suddenly crashed, falling by more than $3,000 in two hours.
As the price of Bitcoin soared and plummeted, the people who opened futures contracts were also "brutally slaughtered and wailed." At 17:00 on March 14, data from Hetongdi showed that in the past 24 hours, a total of 96,700 people had their positions liquidated, with a total liquidation amount of US$891 million (about RMB 5.8 billion).
Mining market is “crazy”
As we all know, Bitcoin is not issued by a specific institution, but is generated through a large amount of calculation based on a specific algorithm, which is the so-called "mining". Specifically, according to the Bitcoin POW (proof of work) mechanism, each computer node uses its computing power (also known as "computing power") to compete for the right to keep accounts. Whoever wins the right to keep accounts can get the corresponding Bitcoin reward generated by the system. Among them, the hardware equipment for mining is called "mining machine", the individual miners who buy mining machines are called "miners", the place that hosts mining machines and provides electricity is called "mining farm", and there are also mining platforms "mining pools" and so on.
The rise in Bitcoin prices has directly driven a surge in demand for mining machines, with many investors buying more high-computing mining machines. Zhang Li (pseudonym), an industry insider, said that Shenzhen Huaqiangbei has become one of the largest mining machine sales distribution centers in the country and even the world. Many companies in one office building are doing mining machine business, and graphics cards are out of stock. Zhang Li also told the Beijing Business Daily reporter that Bitcoin prices have risen sharply, and the mining machine market is in short supply. This frenzy has lasted for a long time, and even laptops have been sold out and used for mining.
The mining machine market is booming, as evidenced by the fact that it is hard to find a mining machine in the mining machine mall. On March 14, a Beijing Business Daily reporter found on the Yibit official website that all 13 mining machine products were shown to have zero inventory, and 8 of them were even marked as sold out. Among them, the Yibit E12 mining machine, which costs 13,200 yuan, will take at least three and a half months to be shipped after payment.
In addition to the new machines being sold out, the second-hand mining machine market is also hot. On March 14, a person claiming to be "a long-term second-hand mining machine collector in Shenzhen Huaqiangbei" advertised in WeChat Moments and major platforms, "Buying a large number of Shenma m20, m21; a large number of s17, t17, s19; a large number of various Bitcoin machines..." It is understood that even second-hand mining machines are being snapped up in a frenzy.
Regarding the mining machine market, Song Jiaji's team from Guosheng Securities Blockchain Research Institute introduced that from 2018 to 2019, when Bitcoin was in a bear market, few companies entered the mining industry except for individual investment companies. However, since 2020, companies in the IT industry (such as online games, information security, etc.) have begun to enter the mining industry. Relevant data shows that as of February 20, 2021, 40 companies around the world, including overseas mining stocks, have owned more than 1.31 million bitcoins, more than 6% of the total 21 million bitcoins, and worth more than US$73 billion.
There are many hidden dangers behind
Behind Bitcoin's continuous record highs, it is still important to note that the mining market is extremely frenetic and fraught with risks.
"Overall, the continued upward trend of Bitcoin prices and breaking new highs will increase the market's enthusiasm and demand for mining machines, which in turn will have a direct impact on the mining business." However, Su Xiaorui also pointed out that, combined with the recent cleanup of mining businesses in some regions, the current overly hot mining market will pose policy risks, both domestic and foreign policy risks.
On the one hand, there is policy risk. Because of the "high energy consumption" problem, after being nearly listed as an "industry that has been explicitly eliminated or immediately eliminated by national industrial policies" by the National Development and Reform Commission in April 2019, at the end of February 2021, the Inner Mongolia Autonomous Region Development and Reform Commission once again issued the "Several Guarantee Measures to Ensure the Completion of the "14th Five-Year Plan" Energy Consumption Dual Control Target Tasks (Draft for Comments)", planning to comprehensively clean up and shut down virtual currency mining projects, and withdraw all of them by the end of April, and strictly prohibit the establishment of new virtual currency mining projects.
On the other hand, there is price risk. The current surge in Bitcoin has pushed up the price of mining machines. In the view of industry insiders, the sales of mining machines are driven by the surge in virtual currencies such as Bitcoin, but if the price of the latter plummets, the mining machine market will undoubtedly be greatly affected. At the end of January 2021, the price of Bitcoin climbed to a high level and suddenly "dive", and many second-hand mining machines were sold at a discount.
Su Xiaorui told the Beijing Business Daily reporter that since Bitcoin is widely characterized as a speculative asset, the Bitcoin mining industry, which is dependent on speculative assets, also has speculative attributes. For the subsequent business development of relevant institutions, it is recommended to recognize the uncertainty in the market and diversify risks as much as possible, develop diversified products, and avoid external shocks brought by single business risks.
Song Jiaji's team suggested, "Related institutions should guard against the risk of currency price fluctuations and do a good job of inventory management in the future. The current epidemic situation in the United States has eased, the pace of economic recovery has accelerated, and the central bank's monetary policy has shown signs of marginal tightening. The pace of asset allocation of traditional enterprises may be affected. We need to guard against the risks of falling currency prices, reduced mining income, increased inventory of mining machine manufacturers, and excessively high costs of purchasing Bitcoin." |
