Mining life and death situation: The epidemic may overdraw the halving market in advance, and 2020 will usher in the turning point of the industry

CoinMarketCap data showed that on January 3, the price of Bitcoin fell back to $6,871, and then started an upward channel, breaking through the two major thresholds of $7,000 and $8,000 on January 4 and 8 respectively.

On February 9, the price of Bitcoin broke through the $10,000 mark. Driven by the rise of Bitcoin, the prices of mainstream currencies such as Ethereum and BCH have also soared.

CoinMarketCap data shows that from January 3 to February 18, the overall market value of digital currencies increased by 50%.

Why did the digital currency market suddenly surge in early 2020?

Many people believe that this is the result of the positive impact of the once-in-four-year Bitcoin production halving and the COVID-19 pandemic.

The sudden outbreak of the epidemic caused some off-market funds to enter the cryptocurrency market out of a risk-averse mentality, and this small market benefited from it.

The epidemic has also affected the mining industry, and in turn affected the cryptocurrency market.

In early February, Jiang Zhuoer, CEO of Litecoin Mining Pool, said on Weibo that the situation on the front line of the mine was very bad and one of the company's mines in Xinjiang was ordered to suspend production.

Jiang Zhuoer Weibo

He said that not only this mine, but other companies in the industrial park where the mine is located were required to suspend work and production.

"This situation is just an isolated case in the mining circle," miner Wu Di told Yiben Blockchain. "Right now, the epidemic mainly affects logistics."

Due to the need for epidemic prevention and control, many places have taken road closure measures to control the flow of people. However, the "hardcore road closure" blocked the flow of materials - some media reported that due to the lack of feed supply, laying hens even starved to death in a chicken farm in Henan.

Similar situations also occurred in the mining industry. Due to logistics difficulties, mining machines could not be transported and mining farms could not be deployed. Many investors who wanted to enter the mining market could only buy coins in the secondary market, which in turn pushed up the price of coins.

So, will the epidemic overdraft the halving market?

“This possibility cannot be ruled out. Since the mining machine factories have not resumed work and cannot produce mining machines, the new computing power will be affected.” Yu Yang, COO of Mine Ocean Association, agreed.

But some people hold different opinions. "The halving market is not a one-time thing, but a long-term market of about 10 months from before to after the halving." said a mine owner.

In his opinion, investors who buy bitcoins because they cannot buy mining machines will choose to hoard bitcoins instead of selling them even if they enter the mining market. The liquidity of Bitcoin will only be locked, thereby pushing up the price of the currency.

Although there are different opinions on the impact of the epidemic on currency prices, almost all people in the mining circle believe that the epidemic has had an impact on the mining industry.

The ones hardest hit are the mining machine dealers in Huaqiangbei.

Huaqiangbei Electronics Market is China's largest mining machine distribution center. Once upon a time, 70% of the world's mining machines were shipped from here to mines around the world.

"Affected by the epidemic, the Huaqiangbei Electronics Market has delayed its opening twice, and many people have gone to sell masks." Xiao Hu, a mining machine salesperson at Huaqiangbei SEG Electronics Market, told Yiben Blockchain.

Shenzhen Huaqiangbei major electronics markets postponed opening announcement, source: 36Kr

An announcement circulating on the Internet showed that most of the major electronics markets in Huaqiangbei, which were originally scheduled to open on February 18, have postponed their opening again, and some markets have postponed their opening to March 6 or 7.

“When the price of Bitcoin soared in the past, the entire Huaqiangbei was filled with people buying mining machines.” Xiao Hu said that the inability to open the market caused many mining machine dealers to suffer heavy losses.

Mining machine dealers cannot do business and miners cannot buy mining machines.

"For miners, the most direct impact of the epidemic is that new machines cannot be brought in and machines that need maintenance cannot be taken out." Miner cC told Yiben Blockchain.

Mining machine manufacturers stopped production, dealers stopped working, and logistics came to a halt. Miners could only watch the price of coins rise but could only worry.

"In order to solve the problem of insufficient mining machines, even the old antique mining machine Ant L3+ has been restarted." cC said.

Antminer L3+ is a Litecoin mining machine released by Bitmain in March 2017. A year ago, it was sold as scrap metal. Now, with the recovery of the cryptocurrency market, L3+ has also come back to life.

According to the data from the FishPool, as of February 17, 2020, based on an electricity price of 0.38 yuan per kilowatt-hour, the daily income of an Ant L3+ mining machine can reach 2.49 yuan.

The increase in daily revenue of mining machines has directly pushed up the market price of second-hand mining machines.

"A second-hand L3+ used to cost only 150 yuan, but now it has risen to more than 400 yuan," Wu Di told Yiben Blockchain.

Similarly, the Antminer S9, a flagship machine that was once on the verge of being eliminated, has become popular again.

"We are buying back second-hand mining machines at high prices. The money is ready. Cash transactions are accepted and we will pick up the goods at your door." In multiple mining circle communication groups, people keep posting such advertisements.

"Recently, the Ant S9 with 13.5T computing power was sold for more than 500 yuan," Wu Di told Yiben Blockchain. "You know, at the end of last year, the S9 was only worth more than 300 yuan."

According to the F2Pool data, as of February 17, 2020, based on an electricity price of 0.38 yuan per kilowatt-hour, the daily income of an Ant S9 mining machine was 2.11 yuan.

This means that miners who purchased S9 at the end of 2019 can recoup their investment in half a year.

"Based on the current coin price and computing power growth rate, S9 is expected to last until the end of the flood season in 2020," said Wu Di.

Miners are unable to buy new mining machines, and mine owners are worried about the construction period of new mines.

Affected by the epidemic, many newly built mines were unable to start operations. Faced with this wave of market conditions, mine owners and miners had no choice but to miss out.

"Some people buy coins directly in the secondary market, while others plan to purchase mining farms directly in a package, buying both the mining farms and mining machines together," said Wu Di.

During this special period, mining machine manufacturers have launched a new mining machine sales model - cutting computing power.

Innosilicon, a mining machine manufacturer based in Wuhan, the epicenter of the epidemic, recently launched a "full-currency live sales model."

In this mode, customers can place orders remotely, lock in a running mining machine by paying a deposit, cut computing power by paying the full amount, and transfer the mining machine income to the customer's own Bitcoin wallet.

“This is equivalent to Innosilicon hosting its own mining machines,” said Wu Di.

In the eyes of many miners, the period of Bitcoin production halving coincides with the replacement of old and new mining machines. Miners are faced with the life-and-death decision of choosing 7nm or 16nm mining machines.

"Currently, the entire network has about 100E computing power, of which 35-40E comes from mining machines from the S9 era. After the first flood season after the halving ends, which is November this year, these mining machines will basically die," miner Chen Ping told Yiben Blockchain.

For miners, whoever can complete the replacement of machines as soon as possible will be able to control their own destiny more effectively.

On the other hand, the mining machine production capacity of the mining circle will also be constrained by the total production capacity of the chip industry. In 2020, the outbreak of 5G may bring a new wave of phone replacement, and mobile phone chips will also squeeze the production capacity of mining machine chips.

“Mobile phone manufacturers have snatched away the chip production capacity of mining machine manufacturers. As a result, the production capacity of new mining machines has decreased and the prices have increased,” said miner Lao Zhao.

Therefore, for mining machine manufacturers, 2020 is a year that determines life and death - only with enough funds can they survive.

"This is also the reason why major mining machine manufacturers are scrambling to go public in 2019," said Lao Zhao.

On January 2, Canaan Creative published an open letter. In the letter, Canaan Creative CEO Zhang Nangeng stated that the company will continue to launch AI products and create a platform business model based on hardware products. It plans to use core hardware including blockchain and AI chips to create MaaS and SaaS platforms.

"It is not difficult to see from Canaan's open letter that developing new profit models is the most urgent need for mining machine manufacturers," Lao Zhao told Yiben Blockchain.

Affected by the halving of Bitcoin production, mining pools and mining machine service providers are also facing a life-and-death test in 2020.

“The impact of halving on mining pools is also relatively large,” Shenyu, co-founder of F2Pool, said at a media event recently.

He pointed out that the business model of the mining pool is to provide stable mining services to miners and charge a fixed percentage of service fees. Since the number of bitcoins mined is reduced by half, the absolute value of the mining pool's profit will also be halved.

But the cost of mining pools has not changed. This is because mining pools have high technical requirements and require the purchase of stable servers, bandwidth, and technical personnel.

In 2020, turning points are emerging in both the mining circle and the entire digital currency industry.

In 2020, the entire chain of the mining industry, from mining machine manufacturers, mining machine dealers, mining pools to miners and mine owners, will face unprecedented challenges.

A new round of reshuffle is approaching, and a tense atmosphere is already in the air.

The eliminated will be eliminated, and the survivors will have the last laugh.