Bitcoin price exceeds 10,000, Huaqiangbei mining machine dealers sigh in despair during the epidemic

Text｜Hulian Pulse·Liangshan Huarong

"We have been waiting for the halving for a long time, but the store cannot open, and my colleagues have gone to their WeChat Moments to sell masks and disinfectants as a side business." Ms. Hu, who is engaged in the mining machine business at SEG Electronics Market in Huaqiangbei, Shenzhen, has been quite distressed recently.

Recently, stimulated by multiple factors such as the spread of the epidemic and the halving of Bitcoin production, the price of Bitcoin in the global trading market has once again exceeded the $10,000 mark. In the past, the mining machine business must have been in full swing at this time, but now under the influence of the epidemic, Huaqiangbei SEG has no choice but to suspend business.

"It was said before that the store would open on February 10th, but then it was postponed to the 18th. I don't know if there will be any changes." Ms. Hu told Hulian Pulse that even if the store opens now, it can only do business with old customers, and logistics and express delivery will also be delayed. New customers are afraid of infection and dare not come to the store to inquire about prices.

It is not just Huaqiangbei that has been affected by the epidemic. From mining machine manufacturers and distributors to mines in various places, the entire mining industry chain can only sigh in despair during this wave of Bitcoin's "small spring market."

(Shenzhen Huaqiangbei SEG Electronics Market postponed its opening twice)

The mining industry chain under the impact of the epidemic

"The market has turned for the better again, and the market demand is very strong. In the second half of last year, I stockpiled a lot of second-hand mining machines, all of which have been pre-ordered and will be shipped as soon as the logistics are open." Ms. Li, another mining machine business in Huaqiangbei, told Interchain Pulse that due to the approaching Bitcoin halving, some mine owners planned to place orders after the new year before the Spring Festival. Now that the epidemic is spreading, the price of the currency has risen again, and it is difficult to get the goods. Logistics and transportation are a problem. In addition, the delivery time of new machines by mining machine manufacturers will also be delayed.

However, Ms. Li also said that for some miners, due to the impact of the epidemic on logistics and transportation, they cannot buy physical mining machines, but they can also cut computing power. "Many dealers in Huaqiangbei have their own mining farms, and they can sell part of the computing power of their own mining farms to customers. In simple terms, they rent other people's mining machines to mine, and return them to the mining farm when they expire, and they don't have to move the machines around."

Compared with mining machine dealers, the direct losses caused by the epidemic to mines and miners are not that great, but it has also produced negative impacts to varying degrees.

Just last week, Jiang Zhuoer, the founder of Litecoin Mining Pool, revealed on Weibo that in some remote suburban mines, police have forcibly closed the mines and prevented them from resuming work. In addition, materials and personnel from other mines cannot enter or leave, which has a great impact on mine maintenance, resulting in machine failures that cannot be handled.

(Police in a certain area of ​​Xinjiang forcibly closed a mine)

In addition, according to a recent report by Chain Catcher, F2Pool COO Dayu also revealed that some local mining farms have been directly shut down and the operation and maintenance personnel have been laid off, while in some places, there is only outflow but no inflow.

Currently, the country's major Bitcoin mines are mainly concentrated in Sichuan, Yunnan, Inner Mongolia and Xinjiang. As of February 11, Sichuan had 417 confirmed cases of novel coronavirus pneumonia, Yunnan had 153, Inner Mongolia had 58 and Xinjiang had 55. Industry insiders pointed out that once the epidemic spreads to areas such as Sichuan where it is more serious, local mines will inevitably suffer losses.

Recently, a mine manager in Sichuan revealed to the media that although most mines have not been shut down due to the epidemic, new mines cannot be built or expanded.

This is obviously not good news for upstream mining machine manufacturers.

On the other hand, under the influence of the epidemic, mining machine manufacturers such as Bitmain, Canaan Creative, and Shenma Mining Machine have all issued announcements, announcing the postponement of the production, delivery, and after-sales of mining machines.

Bitmain's sales director Fan Xiaojun recently made it clear to the media that due to the impact of the epidemic, the delivery of major mining machine manufacturers may be delayed. Now most personnel cannot return to work on time, and there will be certain delays in the delivery of chips, supply chains, and materials.

This means that the production capacity of new machines of mining machine manufacturers will face a tightening situation. In addition, during the epidemic, some mines were closed or unable to expand, and the downstream incremental market was limited. In the first half of this year, mining machine manufacturers did not have an easy time.

Wang Xinxi, co-founder of the Litecoin Foundation, also pointed out recently that the epidemic will have a significant impact on the cash flow of mining machine manufacturers, and hopes that they will have enough cash to keep the company running normally.

After the Bitcoin halving, is mining still a profitable business?

Compared with the impact of the epidemic, another more serious problem facing most miners is whether Bitcoin mining is still a profitable business after the halving?

Recently, some analysts pointed out that the current price range for miners to break even is between $3,500 and $7,000, but after the halving, the price range of Bitcoin will only be between $12,000 and $15,000 for miners to continue to make profits.

After the Bitcoin halving, as the computing power of the entire network continues to increase, the difficulty of mining will further increase. According to the latest data from BTC.com, Bitcoin has adjusted its mining difficulty to 15.54T, which has increased by more than 20% compared to 12.95T at the beginning of this year, setting a new record high.

(Bitcoin mining difficulty growth logarithm source: BTC.com)

The increase in the computing power of the entire network means that a large number of miners will have to continue to invest in more or more powerful mining machines to increase the probability of mining, and due to the increase in investment, the cost of Bitcoin mining continues to increase, which in theory will drive the continuous rise in Bitcoin prices.

But the key point is that the current rise in Bitcoin prices is not directly caused by the increase in mining costs. More factors are the positive impact of the epidemic, Bitcoin's safe-haven properties, and the short-term changes in supply and demand brought about by the halving of production, which have driven the price increase.

This also means that after the epidemic and halving are over, as the positive factors end, the price of Bitcoin is still likely to continue to fall.

Although Bitcoin saw a surge after the halving four years ago, there were very few Bitcoin believers at the time, and miners could influence the price of the currency to a certain extent. But now with the entry of a large number of traditional financial institutions, the factors affecting the rise and fall of Bitcoin prices are more complicated.

Currently, there are only about three months left before the Bitcoin halving. If the epidemic can be brought under control as soon as possible, a large number of miners will inevitably quickly upgrade old machines or expand mining farms, and the computing power of the entire network will also experience a surge. However, due to the tightening production capacity of new machines by major mining machine manufacturers, miners who cannot get new machines may face greater pressure. If the mining returns decrease, these miners are likely to shut down their mining equipment to reduce losses.

Tone Vays, a former risk analyst at Bear Stearns, the fifth largest investment bank on Wall Street, once predicted that in the worst case scenario, after the Bitcoin halving, 70% of mining machines may be shut down due to negative income, and the price of Bitcoin will spiral downward and then come back to life.

Regardless of the final outcome, it is certain that after this Bitcoin production reduction, as mining difficulty continues to increase and mining costs rise, most miners will be more sensitive to price fluctuations. Once the price of the currency drops sharply, triggering the shutdown price, the history of "selling mining machines by kilogram" may be repeated.

This article is original from [Hu Lian Pulse], please indicate the source when reprinting!