Observation | The dilemma and choices of miners when the dry season encounters a new high in the price of coins

After traveling thousands of miles through numerous crises, all for one purpose - survival.

The most obvious feature of crypto mining is that it is driven by electricity. The price of coins, electricity prices, etc. play a key role in determining whether a mining machine can be turned on. During the dry season, the hydropower supply in the south is interrupted, and thousands of mining machines migrate to the north to maintain their business. When the flood season comes, the hydropower supply is sufficient and the electricity price is low, the mining machines will move back to the south again.

The dry season is approaching, and from hydropower to thermal power, from south to north, a massive transfer of life and death has begun.

Go Northwest

When the flood season ends, millions of mining machines will face the problem of relocating in a short period of time. Starting from the southwest across the entire China to the northwest year-round power mine, the miners' migration season is like migratory birds, but in the opposite direction.

The relevant person in charge of Huobi Mining Pool said that the relocation location this year will be Xinjiang, Inner Mongolia, and Qinghai is also a new direction. Due to the epidemic, people are still not optimistic about foreign mining farms this year.

Marvel Capital founder Mint holds a similar view.

"It must be domestic. There are too many force majeure factors abroad, and the overseas epidemic is completely uncontrollable. After the domestic flood season ends, the power will go to thermal power plants in Inner Mongolia and Xinjiang." Bo He, founder of Marvel Capital, told Golden Finance, "As far as I know, many large domestic miners have successfully deployed overseas, and they are also very stable. Stability does not mean stable power supply, but stability without power supply all the time, which is a big problem in actual use. There are relatively few mining circles overseas, unless they are foreigners' own mines. Otherwise, China is the first choice for large miners."

Of course, as long as there is a region with relatively cheap electricity resources and relatively compliant electricity usage qualifications, it may also be an option.

"But according to the miners I know, some mines in Qinghai have been closed down this year." Bohe pointed out, "When choosing a mine, you should do as much research as possible and try to choose a branded, larger mine or an old mine that has been in operation for more than one or two years."

However, there is an obvious uncertainty factor in this migration process - the epidemic. As of 16:00 on the 26th, a total of 164 people were found to be infected with the new coronavirus in Kashgar, Xinjiang, and all of them were asymptomatic.

"This epidemic will definitely affect the progress of migration, and miners are racing against time. The biggest question is whether the recent outbreak of the epidemic will lead to a blockade of Xinjiang (Southern Xinjiang)." Huobi Mining Pool said.

Bohe said that the outbreak in Xinjiang depends on the control situation. At present, some miners are already on the road to migration, and some miners are waiting and watching. The flood season in Yunnan has not yet ended, and there are many miners who choose to stay in the hydropower plant. The dry season does not mean that there is no electricity at all. The stability and price of electricity are compared with the loss of mining machines during long journeys. The machine maintenance expenses are also not small. Many miners still prefer to keep the machines in hydropower mines.

Where will the currency price go?

The large-scale migration of mining machines will inevitably lead to a decrease in computing power, thereby adjusting the difficulty of mining.

According to data from btc.com, the current network computing power is 126.08EH/s, and the next difficulty adjustment is predicted to be a 4.34% decrease.

Obviously, the arrival of the dry season will also bring new challenges to the mining market, as well as huge development potential hidden in the crisis.

So what will happen to the price of Bitcoin next?

Bohe said that the migration of mining machines will not affect the price of coins. After the flood season, a batch of old machines will be eliminated, the computing power of the entire network will be reduced, and the income of mining machines will increase. Therefore, many people outside the market are considering entering the market, and old miners are also increasing their positions in machines.

We may also be able to see some clues based on the Miners' Position Index (MPI).

MPI can show miners' views on the short-term trend of Bitcoin price. An MPI index higher than 2 indicates that miners tend to sell Bitcoin after mining; if the MPI is negative, it indicates that they are optimistic about the short-term trend and choose to hoard Bitcoin.

In the first half of 2020, miners only showed two brief selling intentions in March and May, and the MPI index was basically below 0 for the rest of the time; however, after entering July, the MPI index stood above 1.5 many times, especially when the Bitcoin price was US$11,500 and US$12,000, miners showed a very strong selling intention; however, when Bitcoin broke through US$13,000, the MPI index fell again, reaching 0.53 on October 26.

As of press time, Bitcoin has broken through its year-to-date high of 13495.00 USDT and is currently priced at 13413.56 USDT, a daily increase of 3.35%.