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Kennen, the owner of the mining farm, remembers clearly that on April 2, when Bitcoin started to rise above $5,000, his WeChat account exploded. “Most of them were asking about mining, and I couldn’t get back to them. There were many CEOs of traditional companies with millions of dollars to spend, who could afford to buy mining machines worth tens of thousands or even tens of thousands of units.”
Stimulated by huge demand, the prices of second-hand mining machines have risen in recent days. The price of Antminer Z11 has increased by 4,000 yuan, and the prices of Shenma M3 and Antminer T9+ have doubled.
Most of these mining machines were sold to overseas markets such as Iran through dealers. "At least tens of thousands of them have been sold," said Zhang Xigui, a mining machine dealer.
Among the mining army, there are "CEOs of various traditional companies", miners from various countries who come from afar to purchase mining machines, and asset management giants like Fidelity that are ready to enter the market.
The addition of these forces, on the one hand, strengthens the consensus on the value (or price) of Bitcoin, and on the other hand, also takes a bite out of the current miners' pie.
How high can the computing power surge? Can mining still make money during the flood season? The price of mining machines has doubled, should we chase the increase now? These are the questions that miners are pondering.
- 01-
Second-hand mining machine prices doubled
Zhang Xigui, a Huaqiangbei mining machine dealer, believes that April was the golden period in the past six months. "The price of second-hand machines has doubled," he said excitedly, and then began to "recommend" a popular mining machine - Z11.
Z11 is a Zcash (ZEC ) mining machine launched by Bitmain . A month ago, Bitcoin regained $5,000 after lingering at a low point for 4 months, which excited the coin market. Zcash also rose by 33% that week. The mining machine distribution market, which has a keen sense of smell, moves randomly.
Looking through Zhang Xilin’s WeChat Moments, on April 3, the price of Z11 was just over 9,200 yuan, and the price on Bitmain’s official website was slightly higher, at 10,200 yuan. Three days later, the price of Z11 given by Zhang Xilin in WeChat Moments soared to more than 10,000 yuan.
"The official website also raised the price by 1,000 yuan, and it was sold out by the end of the month. I was one of the few people who had stock." Zhang Xilin said. Seeing that he had stocked up on a rare product, Zhang Xilin directly adjusted the price of Z11 to 13,000 yuan.
"If you want Z11, come on!" "Put on XX channel again"... The picture accompanying Zhang Xilin's Moments is a screenshot of a bank payment, and the text shows the tense atmosphere of "Pre-order now, time won't come back".
In the end, Zhang Xilin received orders for no less than fifty units in those days, making a net profit of thousands of yuan for each unit.
"Some miners saw that the price of the machines had increased by one-third, so they stopped mining with the machines they had just bought a month ago and took them off the shelves to sell," said Zhang Xilin, who also took advantage of the high price to sell more than 100 S9s.
“M3 rises after T9, and S9 rises after T9.” Looking at this incredible market, Kennen, the person in charge of the Force Mine, couldn’t help but feel happy that he had bought the mining machines at the bottom earlier.
At the end of December last year, just one month after the big plunge, the S9 was about to reach the shutdown price. Many bankrupt mining farms started to ship out their products, and the price of second-hand S9 once dropped to seven or eight hundred yuan.
Seeing this, Kennen couldn't help but buy a second-hand S9 at the price of 950 yuan, and now the price has almost doubled. At that time, he estimated that the payback period would be 10 to 11 months, but now the price of the currency has increased by 2/3, and this period is expected to be shortened. Therefore, he is currently looking for "some more stock".
"Restocking" miners like Kennen are one type of buyers in the mining machine market, while another group of buyers are purchasing groups from foreign mines such as Iran.
- 02-
Overseas buyers are buying
Zhang Xilin said that he has received orders for thousands of Shenma M3 and Ant T9+ mining machines, which are mainly sold abroad.
These two types of old mining machines were not very profitable to mine in China half a year ago, and the resale price was also very low, "you can buy it for two hundred yuan." Now, the price of a second-hand M3 has risen to 450 yuan, and the price of a second-hand T9+ has also risen to six or seven hundred yuan.
"It is mainly miners from emerging mining countries such as Iran who are buying them. Their industry is just emerging and they need a large number of mining machines. It is unlikely that they will all buy expensive high-performance new machines. Damage on the road and repairs when they break down are all problems, so they will choose this kind of low-cost mining machine," said Zhang Xilin. He has received many foreign miners at the mine, and during that time he even frequently used English in his WeChat Moments.
According to Zhang Xilin's calculations, as far as he knows, there are tens of thousands of second-hand M3 and T9+ units exported abroad, and if the parts he has not touched are included, the number may reach 100,000 units.
Another senior mining industry insider also confirmed the number of at least tens of thousands of units. “The domestic supply is almost sold out,” Zhang Xilin said.
- 03-
Trillion-dollar asset management giants are betting
The surge in coin prices not only stimulates the mining machine market, but also attracts the attention of off-market funds.
Kennen saw many orders for 5,000 or even tens of thousands of mining machines after the price of the coin reached $5,000. According to him, many of the people who followed this trend were bosses from all walks of life with millions of dollars in their pockets.
“This is also the reason why the price of mining machines has increased. The orders have increased instantly, but the inventory is not enough,” said Kennen.
The logic behind the funds entering the mining industry is simple: digital currencies may rise, and mining coins is theoretically cheaper than buying them directly. As the saying goes, “In a bear market, you can hoard coins, and in a bull market, you can mine.”
In addition, Kennen has some experience with the benefits of funds participating in mining.
According to him, the Force Mine was invested and built by the cryptocurrency fund AlphaCoin Fund, and the project was launched in June last year.
In the second half of last year, the bear market entered a more severe "second half", and many funds were trapped because they could not exit in time, and no longer had funds for subsequent investments. However, AlphaCoin Fund, which has a mining business, has a stable cash flow transfusion, so it is not so difficult in the bear market, and it can still invest in good projects when it encounters them.
With the expectation of stable income and exponential growth in a bull market, many large funds have recently begun to get involved in the mining circle.
According to CoinWorld, on May 5, Fidelity, one of the world's largest asset management companies, revealed at a recent cryptocurrency conference that it will develop Bitcoin mining and related energy industries.
Public information shows that Fidelity Investments manages up to US$2.4 trillion in funds, has tens of millions of customers around the world, and has invested in unicorn companies including Uber, Airbnb, SpaceX, and WeWork.
The conference was attended by large enterprise clients and important participants in the mining industry, such as Wang Chun, co-founder of F2Pool, Pan Zhibiao, co-founder of Biyin, and Dovey Wan, founding partner of Primitive Ventures. Pan Zhibiao confirmed to us that Fidelity is about to enter the mining industry.
With the entry of such a large fund, what the current mining industry needs to worry about is not whether the amount of capital entering is sufficient, but how much market space the mining industry can provide for such funds.
In addition, the blockchain investment institution Fundamental Labs has also launched a first-phase fund of US$44.5 million (approximately RMB 300 million) for computing power construction. In the future, the fund will continue to raise funds in batches, with a total target size of US$150 million.
It is reported that Fundamental Labs was founded in 2016 and is an investor in dozens of blockchain projects including Coinbase, Canaan Creative, and Binance Coin.
According to a rough estimate, if half of Fundamental Labs' first-phase computing power fund of $4,450 is used to purchase S9 mining machines (currently priced at around 1,500 yuan), 100,000 units can be purchased, equivalent to nearly 3% of the current total network computing power.
And this is only the first phase of a fund of an institution. Seeing the practitioners here, it is inevitable to feel mixed emotions.
The good news is that the entry of newcomers and large funds will help the development of the industry. The sad news is that this may also become a nightmare for small and medium-sized retail investors.
“Mining is a zero-sum game (intra-industry competition). If anyone wants to gain, others must lose in proportion.” An old mining man once pointed out the survival rule of miners in one sentence.
- 04-
Should miners chase the rise?
Kennen's Yuanli Mine has 150,000 kWh of electricity in many places across the country, so it won't immediately become a runner-up in the mining industry. But how many people can afford to mine in the future also makes Kennen ponder.
But one thing also comforts Kennen, "The reason why the price of Bitcoin cannot go up now is because there is no new capital entering the market. If Fidelity is mining, then more large institutions may be on the way. This is definitely a good thing for the consensus on the value (or price) of Bitcoin as a whole. This benefit will soon be given to investors who are participating in Bitcoin, including miners."
Finally, let’s look at a question from the perspective of miners. The price of mining machines has doubled. Should we chase the increase now?
The recent rise in mining machine prices and the upcoming surge in computing power during the flood season will affect the investment and revenue of mining.
From the perspective of mining machine dealer Xilin, "The price of the machines has already risen. If the price of the currency does not change significantly, it will be difficult to continue to rise in May."
This also means that miners may not have to invest because they are worried that if they don’t buy now, the price will be higher in the future, as the future price may not necessarily be higher.
In addition, a considerable number of mining farms in Sichuan will usher in the flood season in mid-to-late May and early June. "It is expected that at least 100,000 mining machines will be turned on by then," said Zhao Yun, president of the Sichuan branch of the Mining Association. This is only the scale of the newly added computing power in Sichuan. In addition to the computing power that has recently flowed into Iran and other countries, these are all factors that miners need to consider. (Mars Finance)
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