Bitcoin plummeted, and the "mining circle" ecological survey found that more than 40 mainstream mining machines hit the "shutdown price"

Source: Securities Daily

Reporter: Xing Meng

For the Bitcoin industry chain, mid-March was the darkest period in recent years when people’s “belief” was facing collapse. In the process of major fluctuations in the global capital market, the myth of Bitcoin as a “safe haven asset” also failed. It plummeted from nearly $8,000 on March 12 to around $4,000, and then fluctuated repeatedly between $4,000 and $6,000. It was not until March 20 that the price of Bitcoin returned to above $6,000 with difficulty, and was locked at $6,200 at press time.

This sudden drop has brought a huge disaster to the mining industry that relies heavily on the price of coins. After investigating the digital currency "mining industry" during this round of sharp drop, the reporter of Securities Daily found that more than 40 mining machines have reached the shutdown price, and many small and medium-sized miners have been "persuaded to quit", and a wave of selling mining machines has already appeared.

Although the price of Bitcoin has rebounded over the weekend, miners can only hope that this is the "beginning of good luck" rather than the "halftime of bad luck."

Bitcoin experiences 8 dark days

2.3 million Ant S9s were forced to shut down

In mid-March, Bitcoin experienced its lowest price for eight days in recent years.

On March 12, Bitcoin plummeted, with the price dropping from nearly $8,000 to below $4,200 throughout the day. The most horrific period saw a 16.78% drop in one hour. In the following week, the price of Bitcoin fluctuated between $4,000 and $6,000. According to CoinMarketCap data, from March 12 to 19, the lowest price of Bitcoin was $4,185 (March 12) and the highest price was $5,773 (March 16).

These eight days are almost the most difficult eight days for people in the mining circle. According to the online data of the digital currency mining pool F2pool, as of March 19, 45 mainstream Bitcoin mining machines have reached the shutdown price, calculated at an electricity fee of 0.38 yuan per kilowatt-hour. If turned on and running, each mining machine will lose 0.49 yuan to 28.72 yuan per day, including "king" mining machines such as the Ant S9 mining machine. "According to a rough calculation based on F2pool's full network computing power data, from March 10 to now, about 2.3 million Ant S9s have been forced to shut down." An industry insider revealed to the Securities Daily reporter.

After investigating the mining industry, the Securities Daily reporter found that the low price of coins has triggered a wave of selling mining machines. "Under the influence of the epidemic, the difficulty of maintaining, updating and continuing production of mining machines has further increased, and the '3.12' crash has put many mining farms on sale. The wave of selling mining machines has already appeared, and the average selling price of each mining machine has dropped by 30%-50% compared with before the Spring Festival." Wu Tong, deputy director of the CECBC Blockchain Committee of the Ministry of Commerce and dean of the Digital Economy Business School, said in an interview with the Securities Daily reporter.

After this round of sharp decline, small and medium-sized miners in the mining circle began to "persuade" to withdraw. Most of the small and medium-sized miners hold relatively old and cost-effective models such as Ant S9 mining machines, which require little investment and a long payback period. Due to the relatively backward equipment and high electricity costs, the risk resistance is weak. In this situation, this group of people is the most vulnerable.

It is understood that most of the mining machines that have reached the shutdown price are older models with poor performance, and most of the owners are small and medium-sized miners. For miners who "all in" mining, their personal assets are mostly encrypted currencies such as Bitcoin. In the plummeting market, miners not only face shutdown, but also a significant reduction in their wealth.

In fact, not only miners, but also mine owners have been greatly impacted by the sluggish Bitcoin market. A researcher at OKEx Research told the reporter from Securities Daily that, on the one hand, many mines are still using Ant S9 mining machines for mining. Now that the price of Bitcoin has plummeted, the Bitcoin income from mining is far lower than the electricity cost. Old models like Ant S9 basically need to be shut down, while costs such as factory rent and depreciation of mining equipment still exist, so the losses of mine owners are quite large. "On the other hand, affected by the industry's 'halving market' some time ago, many mine owners expected that the price of Bitcoin would rise, so some mine owners would leverage to buy spot. After the collapse of the Bitcoin price, the losses of leveraged mine owners will be even greater."

Bitcoin falls to $2,600

Will go into shock or die

The shutdown list frequently features the flagship products of the world's three largest mining machine manufacturers. After compiling online data from F2pool, a reporter from Securities Daily found that 27 of the 45 mainstream Bitcoin mining machines are from the three largest mining machine manufacturers, accounting for more than half. Among them, Bitmain's Ant series mining machines are the most numerous, with a total of 11 models including the Ant S9; Canaan's Avalon series mining machines have 10 models; and Ebang International's Ebit series mining machines have 6 models.

Since it is difficult to say that highly volatile cryptocurrencies can generate sustainable profits, regulators are particularly cautious about the listing applications of mining machine manufacturers. Canaan Creative began to plan to go public in 2016, but failed in the GEM and the New Third Board. It then turned to listing in Hong Kong in 2018, but still ended in failure. Finally, the company was listed on the US stock market at the end of 2019 with Canaan Technology as the main body, but it was not favored by investors. It broke the issue price on the first day of listing, and the share price fell to US$3 per share just a few months later, which was far from the issue price of US$9. In addition, Bitmain and Ebang International have also submitted listing applications to the Hong Kong Stock Exchange, but there has been no news.

The decline in Bitcoin prices has also had a significant negative impact on the three major mining machine manufacturers. "For listed mining machine manufacturer Canaan Technology, the sharp drop in Bitcoin prices will seriously affect its financial statements for the first quarter of 2020 and will also have a certain impact on its stock price. For unlisted mining machine manufacturers, the difficulty of listing has increased by one level because the uncertainty of their expected future revenue has greatly increased," said Wu Tong.

If Bitcoin falls further, it will have a disastrous impact on the mining industry. Guosheng Securities analyzed in a research report that if the current price range is maintained, all individual miners using outdated machines and high electricity prices will have to shut down their machines; if the price of the currency drops by another 25% to 30%, about one-third of the outdated machines in the entire network will not be able to make a profit during the high-water period of electricity prices, and the computing power will also drop by about one-third accordingly. At this time, only advanced machines with low energy consumption can continue to mine, and the income of these people measured in currency standard will increase significantly due to the decline in the computing power of the entire network.

"If the price of the currency continues to fall and falls below the shutdown price of the current best-performing Antminer S17 (about $2,600), the Bitcoin network will come to a standstill. Technically speaking, Bitcoin will enter a state of shock or death." OKEx Research researchers emphasized that although Bitcoin is now gradually becoming known to the public, it is still a niche, high-risk alternative investment product. Its market value is not even as large as that of many technology companies, but its volatility is several times higher than that of normal stocks. Therefore, for ordinary investors, the best advice is not to invest in Bitcoin.