There is no more mining machine business in Huaqiangbei: the days of huge profits are gone, and a large number of dealers have left the market

On the 3rd to 5th floors where mining machines are sold, the largest number of people are the store salesmen, so much so that they walk around among them, as if they are accepting a "welcome in line", or as if they are responding to the new low in the coin price and the depression in the mining machine market.

For a full seven hours, Huaqiangbei did not receive a single customer.

That day was November 29, the most common scene in Huaqiangbei during the mining winter. However, 10 months ago, SEG Plaza in Huaqiangbei, Shenzhen was the largest mining machine sales market in the country.

At the beginning of the year, the third to sixth floors were all filled with mining machine sales booths. Even the computer parts shops had a sign at the door listing the mining machine models and prices on sale.

But now, the large group of people who came to buy mining machines have gone away, one-third of the dealers have left the market, and the shops that are still open are deserted.

Bitcoin has been lingering at a low point for more than 20 days, causing millions of mining machines to shut down. Thirty to forty percent of them have flowed into the second-hand market and sold at a low price, while more mining machines are piled up in mining factories and gathering dust.

"The demand side, that is, the miners, is now the dominant force in the distribution of mining machines. Without cheap electricity, even if the price of mining machines is very low, few people will buy them at the bottom." Ji Changming, a partner of a mining company located in SEG Plaza, judged.

Compared with the deserted stall business, the online mining machine business is now staging a "dumping war".

In recent days, the price of mining machines has been falling every day, sometimes even as much as 1,000 yuan. The lack of demand and the dumping of prices by peers have made the mining machine business increasingly difficult.

Recalling the days last year when "even a fool could make money", Ji Changming pondered that the years of huge profits when mining machine sales were in short supply were over, and this industry was becoming unsuitable for survival. Perhaps it was time for him to find a new way out.

The mining machine market in Huaqiangbei has been rising and falling with the price of coins for just over a year. Perhaps it will eventually fade into obscurity, just like the hardware boom of “copycat phones” and fidget spinners. Or, like the coin price that has fallen to the bottom several times, there is still hope for a surge.

Whether it is a mining machine or other hardware, Huaqiangbei is like a hunter, always waiting for the appearance of money-making prey.

'No business'

The changes in the mining machine stalls in SEG Plaza are a microcosm of the mining machine distribution market.

In May this year, SEG's number of specialized mining machine shops reached more than 50 at its peak, and together with the businesses that also run mining machine businesses, there are no less than 100 stores.

Nowadays, the number of businesses selling mining machines has decreased, and many stalls with "XX Mining" written on them have closed down.

Some mining companies have changed their main business to computers, leaving only a plaque on the entire store.

Many of the mining machine stalls that are still in operation have removed the mining machines on the counters, and the market looks almost ready for clearing out.

This situation started to occur in May and June this year.

“Often I sit here for a whole day and no one comes.” Jialin, a mining machine dealer on the fourth floor of SEG Plaza, told Odaily Planet Daily.

Indeed, on November 29, the Odaily Planet Daily reporter did not see a single customer asking about mining machines during the seven hours he spent in SEG Plaza.

On the 3rd to 5th floors where mining machines are sold, the largest number of people are the store salesmen, so much so that they walk around among them, as if they are accepting a "welcome in line", or as if they are responding to the new low in the coin price and the depression in the mining machine market.

Starting from November 15, Bitcoin has been falling step by step, reaching its low of $3,500 this year, a drop of 81% compared to its historical high in December last year.

The price of the currency directly determines the output value of the miners, that is, how much the mined currency is worth.

This round of decline has caused several high-power consumption, low-computing-power mining machines to lose profits.

San Jin, the founder of China Hashrate and a six-year veteran miner, estimated that the shock has caused millions of mining machines to shut down.

After the end of November last year, with a new round of coin price increases, mining revenue increased and the computing power of newly added networks continued to rise.

Data shows that the computing power of the Bitcoin network has increased from 9,600 PH/s at the time to 53,300 PH/s in early October this year (1 PH/s means 1 trillion hash operations per second).

But then, Bitcoin encountered a computing power war and its price plummeted, and the computing power of the entire network fell three times.

At present, the real-time computing power of the entire network is 35,800 PH/s, which has dropped by nearly 1/3 compared to the peak in early October. Based on the computing power of the Bitcoin general mining machine S9 (13.5T), compared with the peak period of computing power, the 1.3 million mining machines in the entire network are likely to have been shut down.

Liu Jungui, a mining salesman with four years of experience in the industry, estimated that "30% to 40% of the idle mining machines flow into the second-hand market at low prices."

Therefore, it can only be said that the mining machine stalls in Huaqiangbei have no new customers, but the online business can still be maintained.

Jialin's stall is on the third floor of SEG. There are no customers in the store, but he is not idle. He updates the mining revenue tables of various models and replies to customer inquiries on WeChat. Then he goes downstairs to pull the mining power supplies that have arrived to the store and takes photos to send to Moments.

Two days ago, he went to a mine in Sichuan to collect mining machines.

The mining machine that Jialin bought is the Shenma M3, which was sold for 20,000 yuan at the beginning of this year. In early November, the Shenma M3 could still be sold for around 6,000 yuan, but the price of second-hand mining machines is currently 1,200 yuan.

After the price of the currency fell, the high power consumption (electricity consumption) of the Shemma M3 caused the mining machine's revenue to drop to the shutdown price.

"For those who use this kind of machine, basically they have to shut down whenever the electricity price is higher than 0.28 yuan per kilowatt-hour," Jialin estimated.

Buyers like Jialin who came to pack the items at the door even received an extremely low recycling price of 260 yuan. He plans to sell it again at 350 yuan.

"After deducting the removal fee, shipping cost and labor cost, I only make 30 to 50 yuan for one machine," Jialin told Odaily Planet Daily.

Those dealers who do not go to the mines in person to pack the machines have to lower their profits even more if they want to sell the mining machines.

“There is still business. But now the profit from selling mining machines is almost the same as that from applying screen protectors to mobile phones.” Acan, a salesman at Dehuikang Mining in SEG Plaza, smiled bitterly.

Under such market conditions, the mining machine distribution market has quietly started the elimination round of prices and channels.

Provoking a "dumping war" for mining machines

Chen Xu is a salesman of a veteran mining company. He told Odaily Planet Daily that when new mining machines are launched, each mining machine dealer will stock up a certain amount of goods according to their own situation. What if the mining machine becomes popular? Many mining machine dealers dared to hold back goods and made a lot of money last year.

But this time, Chenxu's boss obviously made a wrong bet. The mining company bought 20 Shemma M10s when they were first launched in September, with an average price of around RMB 10,000, "which can be considered a heavy investment in the market."

Chen Xu said that he originally thought that Bitcoin would start to rise in November, but the market became increasingly sluggish. "There are still more than a dozen M10s in the office upstairs. Some are willing to sell them for 5,000 or 6,000 yuan." Seeing the transaction price getting lower and lower, Chen Xu's boss seemed to have given up on cutting losses.

With market prices plummeting sharply, stockpiling is undoubtedly surfing the wave for dealers.

“But since people can neither sell nor buy, there is no liquid market, just like a sideways market, which makes it impossible for cryptocurrency speculators to make a profit,” Ji Changming told Odaily Planet Daily.

Therefore, some people used the method of short selling mining machines to stimulate the market.

How to short the mining machine? For example, a mining machine dealer A first accepted the customer's order for Shenma M10 at a price lower than the market price, and agreed to deliver it within 1 week at a price of 5,600 per unit. At this time, A did not have any mining machines.

In order to get a mining machine at a low enough price, he may send out a signal that he is selling Shenma M10 for 5,500 yuan. In this way, dealers who sell it for more than 6,000 yuan will lose the market, and some can only follow suit and lower their prices. This will bring down the price of the mining machine. If everything goes well, he can receive the mining machine at a low price of 5,500 yuan and resell it to the customer, making a business without any cost.

Another situation where dealers short sell is that they hoard a large number of a certain type of mining machine, but do not sell them directly, but instead release price reduction signals to promote the mining machine. After customers place large orders, this type of mining machine becomes scarce again, so the hoarders can raise the price again.

"The market is full of colleagues who are shorting mining machines." Ji Changming's words sounded quite helpless.

“Dealers who sell short can win customers and a small profit, but they also damage the interests of their peers and accelerate the squeeze on the profits of reselling mining machines.”

Chen Xu sighed and said that within just one year, this market had become a red ocean.

All of them closed down, and then revived

Many people know that Huaqiangbei became very popular at the end of last year and the beginning of this year.

But few people know that as early as 2013, this market was providing mining machine components to hundreds of mining machine OEM factories in Shenzhen.

In April 2013, the price of Bitcoin had risen 130 times from the low point at the beginning of the year. However, from April to June, the largest Bitcoin exchange Mt.Gox was interrupted, and the price of Bitcoin fell again by 80%. This made the newly developed mining machine manufacturers face the abyss. Many manufacturers who could not sell their mining machines were promoting their chips at low prices.

As a result, some OEM factories in Shenzhen used the ready-made electronic components in Huaqiangbei to start mining machine OEM factories. At its peak, there were no less than a hundred of them.

Unfortunately, all these foundries closed down in the bear market of 2014. Huaqiangbei’s first mining hardware craze in the mining machine market also quickly passed.

What really made Huaqiangbei step out from behind the scenes and become one of the world's largest mining machine sales and distribution centers was the surge in coin prices at the end of last year.

After October 2017, the price of Bitcoin continued to break through historical highs, and this trend lasted for nearly two months. In addition to directly spending money to buy coins, many people choose to use mining to get coins.

The market is booming and everyone is looking for mining machines, but where can they buy them?

Miners from all over the world who heard the news found Huaqiangbei.

Huaqiangbei was once well-known for its knockoff mobile phones and other electronic products. However, in recent years, affected by e-commerce platforms, the Huaqiangbei market has gradually cooled down.

After sensing the demand in the mining machine market, Huaqiangbei came back to life like a dead tree coming back to life in spring.

Those merchants who were running computer and graphics card businesses quickly found mining machine dealers and started tinkering with the mining machine business.

What’s interesting is that after the rise of the Huaqiangbei mining machine market, almost all dealers who supplied goods to SEG merchants became part of SEG’s stalls.

These earliest mining machine dealers in Shenzhen appeared in the northwest corner of Shenzhen, 50 kilometers away from SEG. There is a street called Shajing, which is famous for producing electronic products. The factories of Bitmain and Shenma Mining Machine are located here.

The success of Shajing is inseparable from its location close to the mining machine factory. In this way, after the order is placed, the factory can send the mining machine directly to the nearest logistics point, and the dealer will then send it to the customer. Compared with transporting to Huaqiangbei first and then shipping, it can save 1 to 3 days in the middle, which is more attractive to miners with large orders.

Based on the 200 yuan per terabyte profit at the end of last year, a 13.5T S9 would lose 2,700 yuan for one day of mining less, not to mention that these miners have ordered dozens or even hundreds of units.

In April 2017, after the price of Bitcoin broke through its historical high and continued to rise, more and more dealers began to sell mining machines in Shajing.

Ji Changming's mining company was established at this time. But at that time they did not have a stall, and their business depended on referrals from acquaintances and online advertising.

Before starting his mining company, Ji Changming and his partners were engaged in stock arbitrage business. When they heard that mining machines had high profits, they devoted themselves to selling mining machines.

At that time, both miners and dealers had to place orders through the official website of the mining machine manufacturer. Ji Changming's mining company relied on the increased bandwidth to grab the first-hand supply of limited quantities on the official website and then sold it at a higher price.

Looking back on those days, Ji Changming felt that they were "busy and fulfilling".

"There is always endless business to do, and the goods are always in short supply. At that time, the price could be raised three times in one phone call. If the other party bargained, we would raise the price. Even those who just said they would not pay would also raise the price. There were a lot of people waiting to buy mining machines." he said.

After the peak, the era of huge profits is gone forever

After the September 4th Incident last year, the price of Bitcoin experienced an even crazier rise, and more newcomers poured into the mining circle. Huaqiangbei became the first stop for these machine hunters.

Dehuikang Mining started business in October last year. Before that, Dehuikang had been doing computer business here for several years. Ah Can said with a smile that stalls like this are called "Old SEG".

Acan still remembers that at that time, including Wellcome Mining, there were only three mining stalls on the fifth floor of SEG.

As the mining machine market became hot, mining machine dealers from Shajing and even other places also settled here one after another. By January, SEG's mining machine stalls reached a climax. According to Prism, almost all the fourth and fifth floors of SEG were engaged in mining machines.

In front of the mining machine stall, there is a long queue of people looking to buy, including many foreigners who come from Russia, Kyrgyzstan, Singapore and other places.

For them, Huaqiangbei is like a wholesale market, where the prices of several mining machines on sale are not much different, and the market is almost transparent. All they need to do is to use WeChat and translation software to make simple inquiries to ensure that the merchants do have spot goods and the prices are not too high. In this market, people with clear goals can do business very efficiently.

Ji Changming was moved that those customers who had never met before deposited millions of yuan into his account without any guarantee. This kind of madness is unimaginable in other industries. "In that environment, even at the end of the mining machine stall, a mining machine would have at least hundreds or thousands of yuan in intermediary fees. The benefits are fascinating and people are willing to take risks for it."

The momentum of huge profits in the Huaqiangbei mining machine market gradually subsided after the Chinese New Year, but few people realized this at the time.

Most people were still immersed in the huge profits they made two months ago. Therefore, dealers continued to stock up, but the previous wave of increases had basically absorbed all the market, so stocking up at that time meant selling at a loss.

Achan confessed to Odaily Planet Daily that the mining company he worked for had been stockpiling goods for three months, and basically lost all the money he earned.

Looking back at this market downturn, Ji Changming believes that the era of huge profits in this industry is gone forever.

Last year, Ji Changming's mining business made tens of millions of yuan with only six or seven people. "This depends on the right time, right place and right people," Ji Changming concluded.

The timing was that the price of the currency was soaring, while mining machine manufacturers generally had not entered the mass production stage. The geographical advantage was that these dealers were backed by the production bases of several major manufacturers, and Huaqiangbei, which gradually developed based on the industrial foundation, was convenient for shipment and transit. The people were that the new high price of the currency at that time attracted many leeks to enter the market, and there were not so many dealers at that time.

All these made Huaqiangbei a seller's market at the time. No matter which link it was, "as long as you can get the goods, even a fool can make money."

What lies ahead?

Now, the people who used to sell computers are back to selling computers.

But the transformation is somewhat difficult for people like Ji Changming who have experienced the ups and downs of mining machines.

"I don't know what to do. I feel that other industries can't earn much more than mining machines. The dividends of the Internet have long disappeared, and traditional industries are also struggling. Just wait." Ji Changming planned. He added, "How long can I hold on? If I can't hold on anymore, I'll find something else to do. What if the market turns around by then?"

"I made so much money last year. I can't just quit when the industry goes bad. I still have to persevere," Achan added.

Dealers like Ji Changming and Acan can be attributed to waiting for the market conditions.

An anonymous industry insider analyzed to Odaily Planet Daily that this reflects that their gambling nature has not changed.

It’s easy for people to get discouraged and leave an industry where the profits are fading. But in this mining machine market that is deeply affected by the fluctuations in the price of coins, people always have a glimmer of hope.

However, the person also believes that the prices of some mining machines have already fallen to a low point, but there is still the potential for an explosion when the market returns in the future. Although, it is still hard to say whether it can return to or even exceed the madness of last year.

Among the factors that affect the future, there are two most intuitive ones. First, after the Chinese New Year, the mining machines of manufacturers began to be mass-produced, and the supply increased. This situation of spot scarcity is difficult to exist. Moreover, throughout the second half of the year, the market has not yet digested the mining machines that were launched this year and the batch of mining machines that entered the market last year. The second is that with the increase in participants, the mining machine distribution market has entered a white-hot stage. Even if some people leave the market for a short time when the market falls, they can quickly return when they make money.

Some people with surplus food and resources have begun to enter other links, such as building mining farms for next year's flood season, doing custody, currency loans, producing new IPFS mining machines, and so on.

Apart from producing mining machines for small currencies such as IPFS, which may become popular for a while, which seems to be Huaqiangbei's strength, other attempts are too far away from the positioning of offline stores for Huaqiangbei.

Mining is a resource-based industry, and only those who have worked in the industry can do well. For those who enter later, the threshold is already quite high.

Ji Changming told Odaily that he had thought about it, but for example, in the past few years, mining operators have tried to find cheap electricity many times. "Unless we are very rich, we can hardly compete with them."

The pioneers will make huge profits, while the latecomers need to work hard. Every industry has its cycle.

Those who left the market had to admit that the era of huge profits in this industry was over, and they even became the ones who took over. The same hoarding operation has resulted in more losses this year.

Some people outside Huaqiangbei are much more calm about the ups and downs of this market.

A senior miner believes that the Huaqiangbei market is a place for speculators in technology information. They collect orders when the market is good and return to their main job after the boom has passed. They are not considered in-depth practitioners in the mining industry.

This intermittent operation has basically become the routine operation of "Old SEG".

Chen Xu basically agrees with this statement. Having been in Huaqiangbei for several years, he has experienced many such things.

During the spring and summer of last year, fidget spinners became popular all over the world, and a large number of merchants from home and abroad came here to buy them. Those merchants who first smelled the business opportunity stocked up a large amount of goods and spread the message in the market, "Sold out, already sold out", which set off a buying spree in the market, causing a fidget spinner that cost less than 5 yuan to be sold for 50 yuan.

But it only lasted for a month before the market became transparent and the price eventually dropped to 5 to 10 yuan per piece.

In the eyes of the "old SEG" people, mining machines are essentially nothing more than spinning tops, "these things won't last long." They seem to be accustomed to such ups and downs.

When the market comes, there is no doubt that as long as it is profitable, the flexible and mobile Huaqiangbei mining machine market will recover again.