Kong Meng, founder of VeryHash: Mining machines are volatile assets, and the return on investment is higher than that of cryptocurrency trading

On June 1, the 2020 Mining Network Digital Mining Summit, co-organized by Mining Network, Bitmain, Antminer, Ant Mining Pool, BTC.COM, and BitDeer, was held in Chengdu. Mars Finance, as a strategic media, followed up the report and interviewed Kong Meng, the founder of VeryHash. Talking about the difference between cloud computing power and computing power trading, Kong Meng believes that most of the cloud computing power on the market is a rental product, and computing power trading is to trade mining machines as an asset. People mainly pay attention to the changes in the price of coins, and rarely pay attention to the changes in the asset price of mining machines. The volatility of mining machines is sometimes greater than the price of coins. For example, the sales price of S9 in April was about 12,400 yuan, but this month the spot price was 19,000 yuan. The income from investing in mining machines is higher than the income from speculating in coins during this period.

Kong Meng said that after paying attention to the volatility and speculation of mining machines, VeryHash appeared, allowing more people to pay attention to the asset price of mining machines. As an asset, mining machines have volatility. Everyone should pay attention to the changes in the price of mining machines rather than simply "locking" mining.

"From 2017 to now, it has shown a very different feature from 2013 to 2017. The price of the currency has basically not fluctuated significantly between the rise and fall. However, since 2017, it has risen from $3,000 last year to $14,000, and then up and down. In fact, there are two main reasons for the rise in the price of the currency this year. One is that more institutions have entered the market, and the second is that more futures exchanges have appeared. Under such a situation of great volatility, the difficulty of computing power has increased slowly, and the mining income has decreased, which in turn highlights the volatility of the price of mining machines. Therefore, if you buy mining machines that can be bought and sold at any time, you can respond to such volatile market conditions at any time."

In Kong Meng's opinion, there is actually no benchmark for cryptocurrency speculation. Cryptocurrency speculation is purely an emotional transaction without fundamentals. However, mining machines have a valuation system. For example, the concept of payback period is equivalent to the price-earnings ratio. The shorter the payback period, the higher the risk of the asset investment. If the asset has a long payback period at this stage, it means that the mining machine at this stage is overvalued in the short term and the investment sentiment is very high. "For example, if you find that the payback period is 600 days when it is priced, it is 100 days. In fact, you should sell it instead of buying it. It is actually a reverse valuation."

He also mentioned the price-to-book ratio of mining machines: in a bear market, mining machine manufacturers generally price their products based on limited profit and cost, and price them by adding a little fixed management profit to the production cost of the mining machine. This price is actually a bottom indicator of the market, because if the secondary market falls below the price of mining machines, it means that the market is likely to enter the stock market, that is, you can buy cheaper mining machines in the secondary market, and you will never buy more expensive new machines. If you enter the stock market, there is actually a particularly good opportunity, and the investment drive is very strong, as long as you bet that the mining machine manufacturers can restore production capacity. "You can speculate on mining machines by speculating on coins, but you can't speculate on coins by speculating on mining machines."

Based on the above two points, Kong Meng believes that mining machines are actually a very good trading object.

As for the electricity price, VeryHash requires the mining farm to pay compensation for power outages, and will also give the mining farm a slightly higher electricity price than the market price. "Because we hope that stable mining farms can make more money. In fact, every industry develops to a mature stage and is in a very standardized and stable state." Kong Meng concluded.