Interchain Exclusive | Bitcoin reaches $8,000, but it can’t save Huaqiangbei’s “mining machine” dealers

Author: Liangshan Huarong, senior editor of Hulian Pulse

"Although the price of Bitcoin has risen to 8,000 (US dollars), we dare not easily persuade customers to place orders." Mr. Pang, a sales manager of a mining machine shop on the fourth floor of SEG Electronics Plaza in Huaqiangbei, Shenzhen, told Interchain Pulse, "If the price drops, it will be difficult for us to explain to the customers."

The price of Huaqiangbei mining machines has always fluctuated with the rise and fall of the price of coins. Recently, the price of Bitcoin has soared, which has once again driven up the prices of mainstream Bitcoin mining machines including Ant S9i and Ebit E9i.

"For example, the price of Ant S9i 14T with official power supply was only 1,400-1,500 yuan per unit a week ago, but now it has risen to more than 2,000 yuan." Mr. Pang introduced that during the week when the price of Bitcoin increased, it was obvious that there were more buyers asking for prices, but most of them were chatting on WeChat, and there were still very few customers who came to SEG stores to inquire about prices.

"The mining machine business is getting harder and harder. When it was hot last year, there were at least 200 shops selling mining machines in Huaqiangbei SEG. Now everyone has either changed their business or closed their stalls." Mr. Pang turned around and glanced at the entire fourth floor of SEG Plaza. "There are only about 10 left, and most of them have mining farms."

In addition to the sluggish Huaqiangbei mining machine sales market, the upcoming flood season in Sichuan has not really excited the miners like last year.

"We are about to enter the flood season, and we still have 40% of idle machine positions in our Sichuan mining farm. Everyone is still waiting and watching." Ms. Hu, the investment promotion manager of a mining farm with over 100,000 machine positions in Huaqiangbei SEG Plaza, told Interchain Pulse that this year's customers' enthusiasm for hosting mining machines is obviously not as good as last year. For miners, mining is not just about cheap electricity bills, but also about the currency price.

Jiang Zhuoer, CEO of Litecoin Mining Pool, recently directly pointed out the pain point, "This year is obviously different from previous years in that there is a serious oversupply of mining farms."

Obviously, for a large number of miners, this year's flood season in Sichuan does not seem as attractive as imagined.

Overall, the withdrawal of mining machine shops in Huaqiangbei and the serious oversupply of Bitcoin mines indicate that the era of Bitcoin mining carnival has come to an end. Whether the mining industry can pick up again still depends on whether this wave of market conditions can continue to improve or maintain a high level.

Huaqiangbei "mining machine" closed down and business went underground

Once the world's largest "mining machine sales distribution center", the prosperity of Shenzhen Huaqiangbei mining machine market may be gone forever.

"When the Huaqiangbei mining machine business was at its peak, 90% of the customers were actually foreigners. They were generally very cautious and would come in person to pick up the goods." Mr. Pang, the mining machine sales manager mentioned above, told Interchain Pulse that, however, from the middle of last year to the beginning of this year, mining machine manufacturers continued to cut prices, and coupled with the continued sluggish market conditions, not only did the number of customers placing orders drop sharply, but profits also became lower and lower.

"Most of them are small orders of a few or dozens of machines. You see, these 20 machines are sent to Iranian customers. We only make more than 50 yuan per machine, and the difference is not enough to pay the rent." Mr. Pang pointed to the vacant booth of less than 10 square meters across the street. "The rent of the Shenlong Mining Bureau is more than 200,000 yuan a year. We are a few thousand yuan cheaper here, but taking into account the labor cost, we will definitely lose money just by selling mining machines."

(Vacant stalls at Huaqiangbei SEG Plaza)

High rents, coupled with the sharp decline in profit margins for mining machines, have severely squeezed the living space of mining machine sales shops in Huaqiangbei.

The last time Interchain Pulse visited SEG Plaza in Huaqiangbei was at the end of March this year. At that time, the minimum profit of a Bitcoin mining machine was only 10 yuan, and there were more than 20 mining machine shops. Now, nearly half of the few remaining mining machine shops have withdrawn.

But the mass withdrawal of mining machine shops in Huaqiangbei does not mean that the mining machine sales market will no longer exist. Without stalls, the sales of many mining machine shops have gone underground.

(Vacant stalls at Huaqiangbei SEG Plaza)

"I can still take orders even without a stall, and I can save on rent. Old customers still look at people when buying mining machines. Of course, if you want business-to-business cooperation, I can register a company at any time." Li Na, the sales manager of another mining machine shop on the fifth floor of SEG in Huaqiangbei, had accumulated a large number of customers before, and now chooses to work alone. "Many of my colleagues who sell mining machines are now working alone. The more they sell, the more they earn. This is also very common in Huaqiangbei."

At present, there are only about ten mining machine shops still standing strong in Huaqiangbei SEG Plaza. In addition to buying and selling mining machines, they have their own mining farms in Sichuan, Xinjiang, Yunnan and other places, and also provide mining, mining machine hosting, mining farm operation and maintenance services, so the survival pressure is relatively not that great.

However, the wait-and-see attitude of a large number of miners during this year's flood season has made life difficult for these mining machine shops that own mines.

Mining farms have too much mining machine hosting and price war is inevitable

Not long ago, some media reported that it is expected that this year, 30% of the mining machines in the entire network will be migrated south from Xinjiang, Inner Mongolia and other places, about 1 million units. However, it seems that the migration during the flood season this year is not as smooth as expected.

"The flood season is coming soon, and many customers are still waiting and watching. They are not in a hurry to finalize the hosting of mining farms. Among our 100,000 machine slots in Sichuan, 30,000 to 40,000 are still vacant." Ms. Hu, a mining investment promotion manager at SEG Plaza in Zhonghua Qiangbei, revealed to Interchain Pulse that the phenomenon of large-scale vacant mining farms is quite common this year, and even a few large mining farms are no exception.

"A very critical factor is that after the flood season, miners cannot be guaranteed to get cheap electricity prices. The flood season only lasts a few months, and it is difficult to judge the market trend afterwards. At that time, they will have to consider migrating again, and the cost is too high." Ms. Hu said that currently more miners who host mining machines are more concerned about whether they can get cheaper electricity throughout the year, that is, stable electricity prices throughout the year.

However, Ms. Hu believes that "because the price of the currency is hard to predict, the electricity price after the flood season cannot be guaranteed, because many mining farms also look for third-party intermediaries to get electricity. If the price of the currency goes up, it is very likely that the intermediaries will raise the electricity price."

Tiantian Mining CEO Chai Hua believes that this year there are fewer miners and mining machines than last year, resulting in a serious oversupply in mines. There are three main reasons for this: first, old mining machines are facing elimination, and machines like Shenma M3 and Avalon A741 are fading out of the market; second, many miners sold their mining machines at the end of last year and exited the market in a dismal manner; third, some miners have moved overseas, which to a certain extent reduced the scale of migration to the south during this flood season.

But Ms. Hu does not completely agree with Chai Hua's statement. "Last year, those who sold mining machines were retail miners with dozens or one or two hundred units. They sold them at a low price because they could not afford the electricity bill. How could miners with more than a thousand units sell them by the pound? If the price of the currency is too low, they usually shut down the machines directly and wait for the market to improve before turning them on again."

In her opinion, electricity costs are the core interests of miners. Currently, due to the oversupply of mining farms in Sichuan, miners are striving for more bargaining power. "Two days ago, we negotiated with a miner for 2,000 units. The electricity price during the flood season was negotiated to 0.25 yuan, which is basically no profit. This price was impossible last year because we couldn't even afford a transformer. Last year, we could only calculate it based on the actual load."

In fact, Han Bing, a partner of Longchi, pointed out not long ago that the current price of mine hosting has almost bottomed out. This also means that a price war for mine hosting during the flood season may be inevitable.

"The cost of thermal power has a lower limit, but the cost of hydropower has no lower limit." Jiang Zhuoer believes that due to the oversupply of mines, the price of hydropower hosting has generally dropped, and the mines must use up the electricity they have signed contracts with power stations. There may even be a situation where mines accept hosting at the cost price.

For miners, cheap electricity prices are certainly important, but blindly pursuing low electricity prices is not the winning strategy. Whether the electricity price is compliant, whether the power supply is stable, whether the mine operation and maintenance is reliable, etc., all determine the ultimate fate of the miners.

This article is original from [HuChain Pulse], original link: https://www.blockob.com/posts/info/14237, please indicate the source for reprinting!