Crazy mining machine market: Iranian miners scramble for mining machines at home, second-hand mining machines tripled in two months

Since April this year, the price of Bitcoin has bottomed out and rebounded, and the mining machine market has recovered again.

In today's mining machine market, the official website is out of stock, spot goods are in short supply, and futures are rampant. Second-hand mining machines that were once sold as "scrap iron" have become popular again.

A battle for mining machines has also begun among miners, with domestic miners and Iranian miners competing to offer higher prices to grab mining machines.

Yang Zuoxing, the founder of Shenma Mining Machine, revealed that the current insufficient production capacity of mining machines is due to the limited wafer production capacity of foundries.

This problem may not improve until next year. The mining machine war may have just begun.

01 "Snatching" mining machines

In April this year, the long-dormant Bitcoin market saw a change. In April alone, the price of Bitcoin rose by 29.6% and returned to the $5,000 mark.

Countless mining machines that had been dormant in the bear market have since begun to "resurrect".

This is evident in the trend of the Bitcoin network's computing power curve - after April, the Bitcoin network's computing power increased significantly and hit a new high on July 9, reaching 64EH/s.

However, the surge in computing power has plunged miners into a "battle for mining machines." The first to fire were Iranian miners thousands of miles away.

Cheng Mei was one of the eyewitnesses of this battle.

"In early April this year, a hydropower station in Chengdu contacted me and said that they had 6,000 Shemma M3 mining machines that needed to be sold," Cheng Mei recalled.

That was the night before the price of Bitcoin went up. At that time, the profit of Shenma M3 mining machine was close to zero, and the price of second-hand mining machine was at a historical low. One of Cheng Mei's clients was hoping to buy at a low price at this time.

"The market price at that time was 260-280 yuan per unit," said Cheng Mei. "I saw that their machines were relatively new, so I quoted them 290 yuan." She hoped to quickly secure the supply by offering a high price, and the power station readily agreed.

But after Cheng Mei and her clients traveled thousands of miles to Chengdu to inspect the goods, the power station became hesitant and even directly rejected Cheng Mei's deposit.

Cheng Mei then realized that someone might have targeted this batch of goods. After waiting for 10 days, the power station told her that the goods were gone and had been bought by a mining machine dealer in Shenzhen.

"I later learned that people in Shenzhen bought the machines at a price 80 yuan higher than the market price and planned to sell them to Iranian miners. At that time, my colleagues in Shenzhen all had orders from Iran, and whoever got the goods would have the opportunity to make money," said Cheng Mei. At that time, only Iranian miners could afford the high price because of the electricity price advantage.

Since then, with the surge in Bitcoin prices and the arrival of the flood season in Sichuan, Bitcoin mining has once again become profitable. The competition for mining machines among domestic miners has also intensified.

The power station that sold the machine could never have imagined that just two months later, the market price of a second-hand Shemma M3 mining machine would exceed 1,000 yuan.

"Compared with China, the total number of mining machines in Iran is still much smaller." Lao He, an Iranian mine owner, told Yiben Blockchain, "In comparison, many new mines have appeared in China recently, and the mining machines are still not enough. The competition for the domestic mining machine market may become more intense."

02 Demand outstrips supply

Just as Lao He said, nowadays, the domestic mining machine market is in a state of being hard to come by.

"The price of second-hand mining machines is several times higher than at the beginning of the year, and the spot price of new mining machines has doubled compared to the official website price. Some models of new mining machines have been scheduled to be delivered until November." Miner Chen Hanping told Yiben Blockchain.

In his opinion, today's mining machine market seems to have returned to the time when mining machine sales were the hottest in 2017.

But just half a year ago, the mining machine market was still depressed.

In December last year, the mining machine market reached a freezing point. Many mining machines, represented by Antminer S9, were shut down on a large scale. There were even rumors that many mines were selling mining machines at "scrap iron prices."

At that time, the price of an Antminer L3+ Litecoin mining machine equipped with an official power supply even dropped to 230 yuan. Chen Hanping has a deep memory of this.

"What does it mean that an L3+ costs 230 yuan? The official power supply alone is worth about 80 yuan. All in all, a mining machine costs less than 150 yuan," said Chen Hanping. "It's like buying a power supply and getting a mining machine for free."

At that time, the price of Litecoin also fell to its historical low of US$22, a drop of 82.4% from its peak.

"Our electricity bill is more than 20 cents, and the daily profit of an L3+ is only a few cents." Chen Hanping recalled, "Those miners who use 30 cents of electricity will lose money when they start the machine."

At that time, he calculated the payback period of L3+ based on the mining machine price of 150 yuan - as long as the price of Litecoin rebounds and the daily profit reaches 1 yuan, the payback period can be achieved in 5 months.

With this mentality, Chen Hanping bought 500 Litecoin mining machines at a bargain price. "Who would have thought that the price of the currency would actually go up?"

When the price of Bitcoin broke through $10,000, miners who had left the market during the bear market returned one after another, and the price of mining machines also increased day by day.

"An L3+ official machine used to cost 70 or 80 yuan, but now it costs 300 or 400 yuan, more than four times the price. An L3+ mining machine that used to cost more than 200 yuan was sold for as high as 1,000 yuan some time ago," Chen Hanping told Yiben Blockchain.

He did a rough calculation and found that the L3+ mining machine he bought last year had earned him three times the money. Adding the Litecoin he mined in the past six months, he realized eight or nine times the profit.

The Bitcoin mining machine market is even crazier.

On Bitmain's mining machine sales page, except for the Ant S9 Hydro, all other models of mining machines are sold out.

Bitmain mining machine sales page

This picture illustrates the current situation of the mining machine market. Not only Bitmain, but also mining machines from various mining machine manufacturers such as Shenma and Xindong are out of stock.

"When Xindong's T2T was first launched, the spot price was only more than 4,000 yuan." Chen Hanping said, "Now the price is more than 9,000 yuan, and it will take another month to ship."

Unable to buy spot products, anxious miners had to turn to second-hand mining machines. The Antminer S9, which was once sold as "scrap metal", has re-entered the vision of miners.

According to the data from the FishPool, based on an electricity price of 0.27 yuan/kWh, the current daily net income of an Antminer S9j with a computing power of 14.5T is 28.6 yuan. Second-hand S9 mining machines have become treasures again.

"The lowest price for a second-hand S9 mining machine was just over 600 yuan, and it came with a government-issued power supply, so it was impossible to sell it," said Chen Hanping. "At that time, when buying a second-hand S9, you could choose the machine and the computing power at will, and if the computing power was not enough, you could refuse to buy it."

"It's different now. The price of a second-hand S9 has risen to 2,500-3,000 yuan," he sighed.

03 Capacity bottleneck

In addition to the rise in currency prices, another important reason for the shortage of mining machines is the insufficient production capacity of new mining machines.

"Based on the current market conditions, as long as there is stock of mining machines, the price can double," Chen Hanping said. "No manufacturer would be stupid enough to play 'hunger marketing' and not sell the goods when they have them."

This is indeed the case.

"The fundamental reason for the insufficient production capacity of mining machines is the insufficient wafer production capacity." Yang Zuoxing, founder of Shenma Mining Machine, told Yiben Blockchain.

In the chip industry, chips are cut and packaged from wafers. Chip manufacturers represented by TSMC are called "wafer factories" in the industry. In addition to developing their own chips, they also have the ability to produce chips and provide chip foundry production services to the outside world.

Wafers of materials used to produce chips

In the mining machine industry, Bitmain and other manufacturers that only design chips themselves and do not have the ability to produce chips will outsource the production of chips to foundries such as TSMC. In the chip industry, such companies are called "fabless."

Obviously, the fabless model has lighter assets and more flexible operations. But at the same time, the production cycle of its chips is limited by the fab.

Since 2019, Bitcoin mining machines have entered the 7nm era, and the production capacity of wafer fabs has made the production of mining chips stretched to the limit. Chips are the heart of mining machines, which seriously restricts the production capacity of mining machines.

"By the end of this year, the wafer production capacity will be very tight," said Yang Zuoxing. In other words, until the beginning of next year, the production capacity of the new model 7nm mining machine will be very limited.

In addition, Intel's withdrawal from the wafer foundry business at the end of 2018 also laid the groundwork for mining machine capacity issues.

The founder of the Aisi community, Brother Chong, previously stated that once Intel withdraws from the wafer foundry business, TSMC will absorb more chip foundry orders, which will continue to squeeze the production capacity of mining machine chips.

He believes that TSMC will definitely give priority to its traditional chip business and send mining machine chips to suboptimal processes, such as 10nm and 12nm chips.

As the commercial era of 5G and AI is approaching, Qualcomm, MediaTek, Huawei HiSilicon and other companies will enter the 7nm chip market to compete. The production capacity of mining machine chips within TSMC will be further squeezed.

Less than a year later, Bitcoin will usher in a new round of production cuts, which means that the number of bitcoins mined per unit of computing power and per unit of time will be halved.

Therefore, some people believe that major mining machine manufacturers will suspend or even stop the research and development of the next generation of mining machines and instead expand the production capacity of existing mining machines.

Regarding this issue, Yang Zuoxing said that Shenma Mining will continue to develop the next generation of mining machines.

"Because the price of the currency will rise," Yang Zuoxing said. The fiat currency income of miners will still remain at a certain level.

Lao Zhao, who is close to a mining machine manufacturer, also believes that major manufacturers will continue to develop the next generation of mining machines.

"If we don't innovate, we will die. After the Bitcoin production is halved, mining machines with greater computing power will 'grab Bitcoin' from mining machines with smaller computing power, and old mining machines will definitely be eliminated." Lao Zhao said.

Computing power is power, and the fight for computing power is a fight for the power of Bitcoin.

The essence of this mining machine war is a battle for Bitcoin wealth.

The soldiers were already on the scene, and they all heard the trumpets.