Building high walls and storing up food, American cryptocurrency miners begin to "stock up" to grab mining market share

Some large U.S. miners have already purchased thousands of new S9 mining machines at wholesale discounts.

For the cryptocurrency industry, the word heard most this winter may be "bear market".

As digital assets continue to depreciate, many miners' mining operations have been hit hard and it is difficult to make a profit. In some cases, some miners have to sell their mining machines and exit the business to avoid bankruptcy. However, even in such a bad situation, some experienced miners can still find opportunities and even start to grab market share.

Build high walls and store up food

Although many miners around the world have shut down their cryptocurrency mining operations (for example, tens of thousands of mining machines in China have stopped operating), the bear market has instead stimulated the creativity of miners. They have begun to try some new, more cost-effective strategies in an effort to ensure that their cryptocurrency mining businesses continue to thrive.

Matt D'Souza, a consultant at KPMG, one of the "Big Four" accounting firms, co-founder of Blockware Solutions, and operator of one of the largest mining pools under Aion Network, acknowledged that while the bear market has caused many mining equipment to shut down, some experienced miners are becoming more creative and starting to grab a larger market share.

If we look back at the development of miners in recent years, we will find that the infrastructure they choose has two main characteristics, one is the large site and the other is low efficiency. Matt DeSouza explained that most of the miners who are still in operation now purchased mining machines between the second quarter of last year and the second quarter of this year, while the participants in the cryptocurrency mining market that have stopped business basically purchased mining machines and signed hosting contracts after the fourth quarter of last year or the second quarter of this year. When the Bitcoin trading price was $9,000, the S9 series mining machine was sold for more than $2,000, and the price of a two-year mining hosting contract for each S9 mining machine was $120 per month.

Survival of the Fittest

According to data disclosed by Blockware, under current market conditions, the monthly price of hosting an S9 mining machine is currently between $60 and $75, and the specific price depends on the number of units hosted. Matt DeSouza said:

“Just like every market cycle - inefficient people will be eliminated, and innovative market participants will observe the mistakes of failed companies and learn from them, deploy leaner and more efficient operations, and build long-term competitive advantages. Even if the price of Bitcoin falls to $1,500, our mine can still survive.”

Generally speaking, each independent miner will pay $0.13 per hour for electricity if he runs a mining machine in his home or ordinary residence. But according to Blockware, by signing a contract with a hosting facility provider and locking in electricity prices between $0.06 and $0.07 per kilowatt-hour, miners can reduce their total costs by more than 40% during the period of Bitcoin price decline. Matt DeSouza added:

“Miners who lock in two-year hosting contracts at current market rates are like value investors who bought Bitcoin at $3,500, just like they bought two-year Bitcoin futures contracts. These miners want to lock in an average S9 fee of $60-75, while the price of mining equipment they can afford is basically between $265-340. In other words, in today's suppressed cryptocurrency market, this is the hosting fee rate and mining equipment price that miners can accept.”

On the other hand, for new miners who are trying to enter the cryptocurrency mining industry, or old miners who are preparing to further expand their mining operations, it is important to calculate the capital expenditure, including the cost of building facilities and purchasing mining equipment, as well as the operating expenses of running mining equipment, including electricity costs and mining capacity, and finally calculate a reasonable input-output ratio figure.

Another key factor to consider is geopolitical issues. For example, most cryptocurrency mining machines are currently made in China, and tariffs have become an issue that overseas miners must pay attention to. According to Blockware, considering that the United States and China are likely to implement new tariff policies, some large American miners have purchased thousands of new S9 mining machines at wholesale discounts. If electricity costs and other operating costs do not change much, this mining power accumulated in the bear market is likely to explode in the future.

Matt DeSouza concluded:

“The bear market in Bitcoin has been destructive, but we are optimistic that many of the large self-mining operations, mining equipment hosting operators, and individual miners will survive and fundamentally recover when the cryptocurrency market recovers.”