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Recently, the price of Bitcoin has been on a roller coaster ride. It was less than $30,000 in early January, and then reached a record high of $40,721 in less than 10 days. In the next 12 days, it plummeted back to $29,532. Behind this "roller coaster" market, the stock prices of Bitcoin mining machine manufacturers have also fluctuated greatly. At the same time, the phenomenon of "supply exceeding demand" in the mining circle is also continuing. However, it is necessary to be vigilant that once the Bitcoin bubble bursts, the risks behind it will also collapse like dominoes.
Mining machine manufacturers' stock prices are on a roller coaster
Since breaking through the record high of $40,000 on January 9, the price of Bitcoin has continued to fall. According to the global currency price website CoinMarketCap, the price of Bitcoin has fallen to $29,308 in the past week. As of 15:18 on January 26, the time of writing, the price of Bitcoin was $31,556, and the price is still fluctuating.
The price increase of Bitcoin in recent months has boosted the upstream mining machine industry. Canaan Technology, a Bitcoin mining machine manufacturer known as the "first blockchain stock" in the cryptocurrency circle, is one example.
Specifically, during the period of August, September, and October 2020, the price of Bitcoin fluctuated around $10,000 for a long time, and Canaan Inc.'s stock price also fluctuated around $2 for a long time; since November 2020, as the price of Bitcoin has continued to rise, Canaan Inc.'s stock price has also risen significantly, all the way to a high of $6.06 on November 30.
In December 2020, Canaan Inc.'s stock price fell again, all the way down to $3.18 on December 11. However, stimulated by the continuous breakthrough of Bitcoin prices in January this year, Canaan Inc.'s stock price rose again, doubling to $7.3. The good times did not last long. As Bitcoin fell, Canaan Inc.'s stock price also fell again. Currently, Canaan Inc.'s latest stock price is $5.24.
Canaan Inc. is a Bitcoin mining machine manufacturer founded in 2013. According to disclosures at the end of 2019, Bitcoin mining machine sales still accounted for more than 99% of Canaan Inc.'s main business at the time.
In recent years, in order to mitigate business risks, Canaan Technology has been trying to transform itself from a Bitcoin mining company to an AI technology company. However, at the end of December 2020, a person from the company revealed to a Beijing Business Daily reporter that the current proportion of AI sales is still very small.
Similar to Canaan Technology, the stock price of another listed Bitcoin mining machine manufacturer, Ebang International, has also shown a similar trend in the past two months. Liu Feng, director of the Blockchain Technology and Application Research Center of the Institute of Artificial Intelligence and Change Management of Shanghai University of International Business and Economics, said that at present, the stock prices of listed mining machine manufacturers are closely following the price of Bitcoin, and it is inevitable that they will move in the same direction. On the one hand, the main business of listed mining machine manufacturers is around Bitcoin mining machines, and the supply and demand relationship of mining machines basically depends on the price of the currency. Therefore, as the price of Bitcoin rises, the profits of miners will rise, resulting in a hot mining market and high prices for mining machines; on the other hand, although some mining machine manufacturers are trying to expand new profitable businesses, such as transforming AI, the reality is that this business has not seen significant progress, so the main business of most mining machine companies is still highly dependent on the price of Bitcoin.
"This also shows that the mining machine industry has a single profit model and weak business risk resistance. If the price of Bitcoin continues to fall, the business risks faced by such companies can be imagined," Liu Feng added.
Beijing Business Daily reporter interviewed Canaan Inc. regarding the reasons for its stock price fluctuations and its latest business situation, but no response was received as of press time.
There are many tricks in buying and selling mining machines
The huge price fluctuations of Bitcoin, in addition to affecting the stock prices of mining machine manufacturers, also caused unrest in the entire mining circle.
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 factors that affect the income of Bitcoin miners are mainly the price of Bitcoin and the proportion of the computing power held by miners in the total network computing power. The factors that affect the cost of Bitcoin miners are mainly the price of the mining machine, the power consumption of the mining machine and the electricity cost, etc." Song Jiaji, a blockchain researcher at Guosheng Securities, told the Beijing Business Daily reporter that recently, the price of Bitcoin has risen rapidly and the income of miners has risen. In addition, the production capacity of Bitcoin mining machines is limited by the production capacity of chip foundries, and the increase in the computing power of the entire network is limited. Therefore, whether it is the price of Bitcoin or the proportion of miners' computing power in the total network computing power, it is good for miners who have purchased sufficient computing power in the early stage.
With the sharp rise in the price of coins, the entire mining machine market is currently "hard to find". For example, on the Yibit official website, more than ten mining machine products are shown as 0 in stock, and 8 of them are marked as "sold out"; in addition, many people told Beijing Business Daily reporters that at present, even if mining machines can be purchased from other channels, the price is 1-2 times higher than usual or even more.
Although the market is getting hotter, the risks behind it should not be underestimated.
On the one hand, there are many scams in the mining machine trading. Lin Feng (pseudonym), an industry insider, told Beijing Business Daily that for a long time, mining machines have been in short supply. On the one hand, this is because of insufficient production capacity of mining machines . In addition, the rapid rise in the prices of Bitcoin and Ethereum has also led to the market hoarding or scams by mining machine manufacturers.
Lin Feng said that the surge in Bitcoin prices has attracted a large number of new miners, but it is generally difficult for them to buy mining machines directly through the official channels of mining machine manufacturers, and they usually buy them from mining machine dealers. However, there are some unscrupulous dealers who label some inferior mining machines and sell them at high prices; in addition, in the second-hand market, there are even some second-hand mining machines that have passed the warranty period and have problems such as missing boards and insufficient computing power, but they are still sold.
On the other hand, with the fluctuation of currency prices, there is still uncertainty in the future.
Liu Feng pointed out that although the price of Bitcoin has experienced a "roller coaster" trend recently, the average price is still on the bull market path and the profits are quite high. Therefore, despite the decline in the price of the currency, the upstream mining circle has not been affected too much and is still in a state of supply exceeding demand. However, it is inevitable that once the currency market emerges from the bull market in the future, how the mining circle can resist the risk of a bear market is still a question that needs to be considered.
Lin Feng also believes that buying mining machines is actually a speculative behavior just like buying coins. But the difference is that buying and selling coins can be completed in an instant, but investing in mining machines is a long process. In addition to the price cost of the mining machine itself, the power consumption and electricity cost of the mining machine, the site fee and other expenses, if the price of the coin falls sharply, it will not be able to generate enough income, and the payback period will continue to lengthen. If the price of the coin falls too much, it may even result in a situation where all the money is lost.
This kind of situation is not uncommon in the mining circle. In fact, in March 2020, when Bitcoin plummeted to below US$4,000 and the price was nearly "cut in half", most mainstream mining machines reached the shutdown price and the mining cost was briefly broken.
Will the bubble burst?
A senior analyst told Beijing Business Daily, "We should be clear that Bitcoin is a high-risk asset, not a safe-haven asset. Moreover, as a special asset class, Bitcoin, unlike stocks or bonds, does not generate any predictable cash flow. The only way for investors to obtain returns is the rise in Bitcoin prices, so it is more likely to form a speculative bubble."
Looking back at the price trend of Bitcoin in recent months, it took more than a month for Bitcoin to rise from $10,000 to $20,000; it took nearly half a month for Bitcoin to rise from $20,000 to $30,000; and it took less than a week for Bitcoin to rise from $30,000 to $40,000. In the opinion of this senior person, this crazy rise shows that speculation in the Bitcoin market has become the dominant factor, the market has accumulated a lot of risks, and a huge bubble has formed, which only needs an external fuse to detonate the entire market.
Song Jiaji's team believes that both Bitcoin miners and mining machine manufacturers should pay close attention to the risks of Bitcoin price fluctuations in the later stage.
Liu Feng pointed out that the mining industry is currently in a stage of supply exceeding demand in a bull market, but it is still a development stage in a cycle. Currently, the mining industry has a single profit model and a weak ability to resist a bear market. The industry is in urgent need of a new business model to allow its own business model to develop from a single polarization to a diversified one.
"The development difficulties and challenges of Bitcoin upstream industry companies are all related to Bitcoin." Chen Wenjun, professor at the Zhangjiang Institute of Fudan University and executive director of the Digital Economy Research Center, also pointed out that once the value of Bitcoin declines, mining machine manufacturers will face huge risks; in addition, many places are cracking down on mining pool-related companies because of the consumption of resources, and the business model of mining machine manufacturers is at risk.
Liu Feng also gave corresponding suggestions to the relevant institutions in the mining circle: "While seizing the bull market boom to expand profits, we must fully consider the entire cycle, comprehensively plan development strategies, actively increase investment in science and technology, and develop closer to the industry in terms of technology, business, and profit model. For example, seizing the opportunity of my country's Digital China strategy and becoming a distributed computing power support and provider will be a good opportunity to follow the trend." |
