Bitcoin mining halving record: thermal power is completely shut down, and hydropower has 3 million loads idle

Author: Arrie

Source: Deep Tide

This just reflects the real situation of some Bitcoin miners today: traveling long distances, and even taking risks, for cheaper electricity prices.

Electricity bills are one of the biggest expenses for Bitcoin miners, and electricity prices directly determine the profits of mining machines.

On May 12, the mining reward for each block was halved from 12.5 bitcoins to 6.25, and miners’ income was also cut in half.

At this time, cheap electricity prices have become so important. Some people are willing to travel to Iran for the legendary 1 cent electricity price, some are willing to break the law for free electricity, and more people choose to move their mining machines from thermal power mines with 3.5 cents per kilowatt-hour to hydropower mines with 2 cents per kilowatt-hour.

As the risks mount, the Bitcoin mining industry is also undergoing a reshuffle and dramatic changes.

This dramatic change is embodied in:

"Almost all thermal power mines in Xinjiang and Inner Mongolia have stopped operation, 20% to 35% of hydropower mines are vacant, and about 3 million kilowatt-hours of hydropower mines are vacant."

Based on the construction cost of 3.5 million yuan for a 10,000 kWh mine, the mine that cost 1.05 billion yuan to build faces the possibility of losing all the money.

The flood season in Yunnan, Guizhou and Sichuan has just begun, but the miners' winter has already arrived.

Chengdu Mining Week has just passed. In previous years, the Rongcheng conference was crowded with people from the mining industry: those who sold mining machines and those who bought mining machines, those who sold machine slots and those who bought machine slots, those who were watching and those who were watched.

After a few meetings, miner Xiao Hei looked around and saw that exchanges and service providers were bustling with people. The familiar old faces were gone.

Even the sparse miners are busy trying to attract investment for mining machines.

Conferences, exhibition halls, banquets, dance floors... those who are toasting are no longer the miners, but the new money, the new generation.

At this moment, most miners are still migrating, trekking, and busy on the road from Xinjiang to Yunnan, Guizhou, and Sichuan. It takes 10 to 17 days for a mining machine to be shut down at a thermal power plant and restarted at a hydropower plant.

The annual flood season has begun. In mid-to-late May every year, hydropower plants across Sichuan open their gates to release water, and it is also the season for miners and mining machines to migrate.

Electricity is the biggest expense in mining. The electricity price in Xinjiang and Inner Mongolia is 0.35 yuan per kWh, but it can be reduced to less than 0.2 yuan in Yunnan, Guizhou and Sichuan. Every penny affects the income of Bitcoin mining.

But this year is a little different from previous years.

Miner Yang Haolin (pseudonym) told TechFlow that many miners or mine owners who had signed year-round electricity contracts with thermal power plants chose to breach the contract.

"We had no choice but to breach the contract," said Yang Haolin, adding that the difference between the electricity price of 20 cents and 30 cents was too big a difference in net profit. "If an M21 machine runs on thermal power (35 cents per kWh), the net profit is 5 yuan a day, while if it runs on hydropower (20 cents per kWh), the net profit is 15 yuan a day."

"Currently, almost all thermal power mining farms in Xinjiang and Inner Mongolia have stopped working," said Yang Haolin. TechFlow asked five or six miners and they all came to the same conclusion: except for a very small number of mining farms that mine ZEC and other graphics cards or operate at a loss without breaking the contract, the rest have basically moved east.

In comparison, mining farms were in short supply in 2018, and both thermal and hydropower were in high demand. In 2019, the flood season arrived, Bitcoin prices skyrocketed, and many places in Sichuan were dry and rainy, so most thermal power mines were still in operation.

This year, the migration has been more thorough and seems to be more desperate - if the price of the currency fails to rise by the end of the flood season, it will be a one-way journey .

"Sichuan still has 20,000 loads, and power is being supplied smoothly. Come quickly if you need it," said a mine owner.

"The 50,000-load consumption site will be powered on the day after tomorrow, and there is still 30,000-load electricity available through direct power supply." Another mine owner called out to guests in the community.

Investment promotion and loading are the most common words and the most difficult problems in the mining circle today.

Yang Haolin said that 20% to 35% of hydropower mines are vacant, which means that hydropower mines with a capacity of about 3 million kilowatt-hours are vacant.

The construction cost of a 10,000 kWh mine is approximately 2 million to 5 million yuan. Based on the median of 3.5 million yuan, this means that a mine that cost 1.05 billion yuan to build may lose all its money.

These surplus mines are the products of the mine owners’ failed gamble on the halving - they thought that the price of Bitcoin after the halving would reach the "previous high" of 20,000 US dollars, but the reality taught them a hard lesson.

Attracting investors for mining machine sites has become the most troublesome issue for mine owners.

On the other hand, in order not to waste mining machine positions and mine construction, mine owners have to find machines that are barely profitable to fill the mines.

This brings the revenue per ton down to zero.

"You can start the machine when the profit per T is 0.7 cents. The total computing power increases, but the profit decreases." Yang Haolin said that idle old machines can be used as computing power reservoirs to reduce the profit per T to a very low level over a large range.

Yang Haolin introduced:

"Before the halving, the Antminer S9 could be powered on with 0.33 yuan of thermal power. The 14T S9 made 8 yuan a day, and (consumed) 35 kWh of electricity a day, which is 7 yuan at 0.20 yuan per kWh. (Now) if you don't need to move, you can power it on now, just a little more than one yuan."

Faced with thinning profits, Bitcoin mining has become a life-and-death struggle. The phenomenon of stealing electricity mentioned at the beginning of the article is also a true reflection of the fact that miners will do whatever it takes to get cheap electricity.

"We won't invest in mines anymore." A private company boss who returned from a mining conference said that after some investigation, he found that it was not yet time to buy at the bottom.

In the blockchain industry, Bitcoin mining is most like the physical industry: it has a long payback period and a heavy asset model.

On the other hand, due to price fluctuations and huge profits, Bitcoin mining is also full of dangers and traps.

"This industry is very gambling-oriented. Once you place your bet, try to consider all the risks. No one can help you," Xiao Hei said.

“Many mines are built without electricity. You spend 20 or 30 million and not even a splash is seen.”

The industry that once made people rich was cut off overnight. The miners who once made people rich are now the most embarrassed and the hardest to step down in the Bitcoin world.

Bitmain, the once dominant mining company, has now bowed its head. In addition to internal strife and low production of new machines, Bitmain's new mining machines also face problems such as instability and high repair rates.

In March this year, a Bitcoin miner told TechFlow that the return rate of the Antminer 17+ series he purchased was about 30%. "The machines after the Antminer S9 series are not very stable. Now I buy new mining machines just to pursue stable operation for two or three years. I will not consider (buying) Antminers."

On the other hand, Canaan Inc. (CAN), the “first mining stock”, has also been embroiled in a financial fraud scandal and sluggish stock prices.

Half a year after its listing, Canaan Inc. was "raided" by a series of short-selling reports. Wall Street short-selling institutions Marcus Aurelius Value and White Diamond successively released short-selling reports, claiming that it violated securities laws, concealed related-party transactions and committed financial fraud.

A class action lawsuit followed. In February, Schall Law Firm, a U.S. shareholder rights litigation firm, announced that it was investigating claims on behalf of Canaan Inc.'s investors. Soon after, Rosen Law Firm also announced that it would file a lawsuit against Canaan Inc. on behalf of stock investors who participated in its IPO.

As of the close of trading on June 2, Eastern Time, Canaan Inc.'s stock price was $2.49, down 72.3% from its IPO price of $9.

The entire Bitcoin mining industry chain has fallen into a slump, with no new entrants and no new money coming in. The only antidote is an increase in the price of the currency.

How high does the price of the currency have to rise before I can buy a new mining machine?

"Only when the coin price increases by 50% will there be motivation to buy new machines." Yang Haolin said that currently 4 to 5 million basic S9 machines have not been turned on, and the coin price needs to increase by another 30% to 50% before they can be turned on.

In the ever-changing world of Bitcoin, the rise and fall of the currency price directly determines fate and success or failure.

The price of Bitcoin determines the survival of the entire industry. No one understands the meaning behind the price of Bitcoin and electricity better than Bitcoin miners.

Just yesterday (June 2), after Bitcoin reached $10,000 for a day, the bulls and bears fought fiercely, and all of them ended up being liquidated.

" The coin price is on a roller coaster, a large number of people have been killed by contracts, there is no hope of making a profit from the mining machines, mining plants are still being built indefinitely, and customers have become the ancestors ..." Xiao Hei sighed, the excitement is theirs, and the miners have nothing.