|
As Bitcoin fell, the computing power of the entire network decreased, and mining companies shut down. Starting from the afternoon of March 8, BTC fell rapidly, and in the following days it once reached 3,600 US dollars. The constantly fluctuating prices stimulated the fragile nerves of crypto investors. Faced with the eye-catching and glaring shutdown price, some Bitcoin mine owners and miners were in a dilemma: if they turned on the machine, they would lose money; if they turned it off, they would also lose money. The most affected are the small mining farms and miners. With insufficient cash flow, some of them have already collapsed on the eve of the halving, either due to crypto lending liquidation or because they can no longer sustain themselves. This has also added a touch of solemnity to May, when the halving coincides with the flood season. For the miners who are still on the scene, which is the best solution: leaving or sticking to it? The mine was shut down. Some people stayed and some left. At the beginning of this year's Spring Festival, two black swans "flew" into the crypto mining market one after another. First, the domestic prevention and control of the epidemic, and then, the global economy was hit hard by the epidemic, and the crypto industry was certainly not immune. Starting from March 8, the entire market fell for many consecutive days. Before the long-awaited Bitcoin halving rally came, the coins in investors' hands had already experienced a halving in price. The sudden outbreak of the epidemic has indeed affected the normal operation of some mines. "Has everyone received their C1?" A miner who had placed an order in a mining machine mall a long time ago was very anxious. He asked in the group for many days, and the replies he got were all that the goods were on the way. The delayed logistics directly affected his mining income. "I wanted to make a profit, but now it seems that it will be a long time in the future." In addition to the machines on the way, mining machines that have not yet been shipped have also been affected. Previously, mining machine manufacturers including Bitmain, Canaan Creative, and Shenma have issued announcements announcing the postponement of the production, delivery, and after-sales time of mining machines. Another miner said that the mine he entrusted to manage also received a notice of clearing and shutting down, but as far as he knows, there are not many similar cases. "Most mines are actually built in remote mountainous areas, and the flow of personnel is limited. In addition, the person in charge arranged the staff on duty before the New Year, so the impact will not be particularly large." In addition to epidemic control, the biggest blow to miners is the market situation. Since March 8, the price of Bitcoin has continued to fall from $8,800. Within a few days, it once reached $3,600. It is currently stable at around $6,000. With such extreme market conditions, the situation of Bitcoin miners has also fluctuated greatly. Screenshot source: Glassnode According to the market price, many mining machines including S9 have reached the shutdown price. The income from mining with the machine can no longer cover the cost. In theory, turning on the machine means losing money. Miners will shut down these machines to reduce losses. More than a year later, the sharp drop on March 12-13 made Wang Wei (pseudonym), an old miner with seven years of mining experience, once again feel the impact of hundreds of machine shutdowns under extreme market conditions. During this period, the mine he and his friends opened has shut down nearly half of the machines, "mostly S9 and L3". However, he is also fortunate that he has always maintained a cautious attitude towards financial instruments such as lending, mortgages, and leverage, and has been able to absorb funds from traditional industries, so that his mine has not been involved in danger. "It wasn't a bull market to begin with, and it never recovered." Wang Wei sighed. Due to the sharp drop in prices, the tragic situation of "selling mining machines by the pound" is still vivid in his mind. At that time, many mining machine manufacturers laid off employees, and friends who sold mining machines switched to WeChat business and selling oranges. These were his most "heartbreaking" impressions in the past. Now, the market is being washed out again, and he has seen it with openness: "Greatness is achieved through perseverance." Xi Tao (pseudonym), a mine owner who entered the industry two years ago and survived the 2018 "mining disaster", suffered a miserable loss this time. A few days ago, he and his team decided to terminate the contract and planned to sell all the mining machines and leave the market. "It's very hard." Li Kong (pseudonym), a mining machine salesperson in Huaqiangbei, Shenzhen, also felt deeply about the recent depressed market: "Except for old customers, few new people come to consult for quotes." From the outside, a reshuffle of miners is taking place, but shutdowns and departures are not the whole story. In mining hotspots such as southwest and northwest China, and in remote areas that have not yet been affected by the epidemic, many mines are still operating normally. For example, mines that have completed machine iterations early can still make money even at the current bleak prices. Of course, there are also many players who lose money as soon as they start up, but still stick with it. "When signing the agreement, there is a requirement that a fine must be paid for shutting down the machine, or if the number of machines running after shutdown does not meet the agreed standard, the electricity price will also increase." A miner explained why he did not shut down his machines that were already losing money. If they were just hovering on the edge of loss, many miners would be like him and "would bite the bullet and turn on the machines", and these machines would not be "eliminated" in a short period of time. In the extreme market conditions of the plummeting, some people were able to stay out of it. Liu Wu (pseudonym), an Iranian mine owner who went overseas and got cheap electricity, told BlockBeats that the epidemic and the crash had no effect on them at all. So far, Iran has confirmed more than 20,000 cases, making it one of the countries with relatively serious epidemics in the world. However, since the epidemic mainly spread in the north of the country, and Liu Wu’s mine is located in the central and southern part of Iran, "there are zero local cases", the epidemic has little impact on the mine, plus the low electricity bills they get, "less than a dime". Therefore, even if the BTC price plummets to $3,600, they don’t have to worry about whether to shut down. Hidden concerns in the mining industry When looking back at this crash, most of the miners and analysts we asked basically pointed the finger at financial instruments such as crypto lending and leverage. In the past two years, the concept of crypto derivatives has become popular in China. These third-party institutions, claiming to help miners obtain stable returns while reducing risks, have successively launched financial products including crypto lending, arbitrage, and mining machine hedging. Miners can lend out coins to get some cash for daily expenses, or use it to expand reproduction, and then repay the loan and get the coins back when the capital turnover is normal. This has become the choice of many miners. In early March this year, PayPal, the industry's leading financial platform, released its annual report data. At its peak, PayPal's loan balance exceeded 330 million US dollars. It can be inferred that the ratio of loan balances between miners and non-miners on the platform is close to 1:1. Therefore, the amount involved in miners' loans on this platform alone is over 100 million US dollars. Of course, if Bitcoin continues to rise, everyone will be happy. Once the market falls sharply, the pledged assets will reach the price line of the platform's disposal of pledged assets in a short period of time, and the system will forcibly dispose of them and automatically sell them, further exacerbating the market selling pressure. The volume of loan assets is very large, "It's like a reservoir." Zhang Zhenyu, a miner from Handan, Hebei, is still haunted by the plunge on December 13. As far as he knows, the money taken out by miners with crypto loans is basically used for reproduction or electricity bills, operation and maintenance expenses, "very rarely for stable investment." During this period, the market fell rapidly, and several of his friends did not have time to add collateral, and eventually "lost their money and coins," "Everyone is healing each other." However, since there is no public data, no one can tell exactly how many miners have been "tragically" liquidated in this market, and we can only learn from individual miners that "the situation is bad." As Wang Wei said, "Cash is more important than gold at the moment." Smart miners will avoid putting themselves in an over-leveraged situation. Will perseverance bring good results? If the price of Bitcoin remains unchanged, when the halving comes, the mining machine's profit will be reduced by half. In theory, mining machines with electricity costs exceeding 50% will have to shut down. Should they continue mining or sell the mining machines to stop losses in time? This has become a must-choice question for miners. At present, there is still more than a month before the halving, and the profitability of Bitcoin mining has also fallen to a relatively low range. Many miners believe that although Bitcoin has recently seen a single-day increase of 1,000 US dollars, there is still no sign that Bitcoin will get out of the downturn, and the mining industry before the halving will continue to be cleaned up. Screenshot source: BitInfoCharts However, unlike the previous two halvings in November 2012 and July 2016, Bitcoin’s third halving coincides with this year’s flood season. The flood season is expected to come earlier than in previous years. Will this be a turning point? Which is more important, power consumption or electricity bills? Some heavily loaded mining farms are already preparing for the flood season. In various miner groups, it is not uncommon to see advertisements for "taking custody" and "low-cost electricity". "This year's flood season electricity bill is expected to be cheaper than in previous years." Zhang Zhenyu judged that even so, the mining business does not seem optimistic. According to his understanding, due to the epidemic and the sharp drop, many mining farms under construction have basically been suspended, and the shipments of several major mining machine manufacturers are not large. "Only mining farms that have completed the iteration of new models can make a profit." Of course, there are also bold miners who are quietly hoarding or reselling mining machines, betting on the market in the next two months. In this ups and downs of mining game, the small players will still be the first to be eliminated. Since the second half of last year, many mining farms have started to update their mining machines. Before this plunge, they had basically completed the model upgrade. And those miners who can go overseas to mine all have deep resources behind them. In the mining "paradise" where electricity costs as low as 0.11 cents per kilowatt-hour, it seems that only a drop in Bitcoin to $1,000 will shake their determination to mine. That is why, when Bitcoin fell to $4,000, they were still planning whether to "expand the scale." After more than a week of adjustment, Bitcoin has now recovered to around $6,000. Although it is far from the halving market that people imagined, an increase is always a good thing anyway, and it is the hope for miners to get out of the haze. (BlockBeats reminds that according to the document "Risk Warning on Preventing Illegal Fund Raising in the Name of "Virtual Currency" and "Blockchain"" issued by the China Banking and Insurance Regulatory Commission and other five departments in August 2018, the general public is requested to look at blockchain rationally, not blindly believe in the exaggerated promises, establish correct monetary concepts and investment ideas, and effectively improve risk awareness; any clues of illegal crimes found can be actively reported to the relevant departments.) *BlockBeats reminds all investors to guard against the risk of chasing high prices. The views expressed in this article do not constitute any investment advice. |
