Mining Circle Shutdown

A major shutdown in the mining industry caused by a "flash crash" in Bitcoin prices has occurred.

In 10 days, the price of Bitcoin fell from US$6,500 to US$3,652. Looking at the K-line chart that dropped one step a day like a staircase, veteran miner You Liang lamented that this wave of market conditions had made both the currency and mining circles miserable, and the entire industry was almost depressed and silent.

Those 10 days are from November 15th to November 25th.

Liao Xiang, who calls himself "Satoshi Nakamoto II", posted a picture of the price of a Bitcoin mining machine on his WeChat Moments, and jokingly said, "The currency market is ruthless, but there is love in the world. Cash is used to buy mining machines, and the price is 10 yuan per pound."

Zhu Yu, co-founder of CoinIn Mining Pool, said that this wave of market conditions caused the shutdown of mining operations that accounted for 25% of the total network's computing power, and CoinIn Mining Pool also lost 30% of its computing power.

"In the past two weeks, 600,000 to 800,000 Bitcoin mining machines have been shut down," said "Shenyu", the founder of F2Pool, to Odaily Planet Daily. "The Bitcoin computing power of F2Pool has also dropped by 10%."

Aniu, the founder of "Mining Club", told Odaily Planet Daily that 60 to 70 percent of miners will leave the market in the "cold winter."

Ten months ago, Bitcoin soared to nearly $20,000, and people flocked to it; 10 months later, the price fell below $4,000, and people left the market again due to the "mining disaster". An industry insider lamented that behind all this, people's blind pursuit of wealth and the ruthless blow of capital bubbles were reflected.

"70% to 80%" of small miners leave the market

In June and July this year, Jiang Zhenqin, an individual miner, sold his 13 graphics card mining machines and 14 Litecoin mining machines (Ant L3+ and Innosilicon A4+) because he was building a new house at home.

"After six months of digging, we made almost no money after deducting the costs." Jiang Zhenqin lowered his brows and looked out the window.

“My wife is reluctant to let go. If she wasn’t in urgent need of money, those mining machines would still be able to make money.” When Jiang Zhenqin said this in early November, he had not anticipated the subsequent market conditions.

On November 20, the price of Bitcoin suddenly plummeted, falling from more than $5,200 to below $4,400. After five days of volatile decline, it hit a low of $3,600. Compared with the highest point at the beginning of the year, it has fallen by more than 80%.

"Like a roller coaster", he watched the price of Bitcoin plummet in those days. Now Jiang Zhenqin knows that the "painful sale" in June actually helped him escape. If he still had it, the Innosilicon A4+ mining machine that could be sold for 5,000 yuan six months ago would only be sold for 200 yuan now.

The plummeting price of coins is undoubtedly a disaster for grassroots miners like Jiang Zhenqin who mainly engage in "mining, selling and withdrawing" and are concerned about short-term profits.

"Many miners have shut down their computers one after another, and the computing power of Litecoin has dropped by 10% directly," he said.

On November 26, "Shenyu" told Odaily Planet Daily that in the past two weeks, 600,000 to 800,000 mining machines across the entire network have been shut down, and the Bitcoin computing power of the fish pool has also dropped by 10%.

“Shutting down the computer is not so bad, it can be regarded as suspending investment and stopping losses in time. The terrible thing is that the miners who did not sell any coins before and waited for the coins (price) to rise, can’t make ends meet at this juncture, so they really have to cut their losses.” Jiang Zhenqin exhaled slowly.

Although he had withdrawn from the industry long ago, he still felt deeply moved by the current state of this industry that once brought him hope and made him think that he could achieve a sharp increase in wealth.

No one can calculate the scope of this "mining disaster". Aniu, founder of the mining community "Kuanghaihui", told Odaily Planet Daily that according to their observation, "70% to 80% of the miners are leaving this time, mainly small and medium-sized retail investors, and there are also one or two large mining farms that have shut down."

"The main reason is that income is not enough to cover expenses, and there is not enough money to survive the severe winter which may end at any time," said Aniu.

The crisis has already hidden

The plunge in coin prices was just the last straw. The mining industry was already mired in crisis when the coin market was still booming.

In December last year, the price of digital currency reached an all-time high, bringing a group of newcomers to the mining industry, which has experienced ups and downs for five years.

Aniu told Odaily Planet Daily that everything was hyped up at the time, and the prices of mining machines, site rentals, and electricity were all very high. The cost of an Antminer S9 mining machine was only 2,000 to 3,000 yuan, but it was hyped up to 30,000 yuan at the time. And in places with sufficient electricity, such as Sichuan, Xinjiang, and Inner Mongolia, many mining farms appeared overnight.

The above-mentioned miner You Liang joined during that period. He came to the mainland from Taiwan specifically in the hope of achieving wealth freedom through mining. Li Qi, who returned from studying in the UK and failed in starting a business in Shenzhen, also joined during that period. He built a factory in Sichuan. In April, when the price of Bitcoin fell below $7,000 and the daily income of a mining machine was only about 15 yuan, he sighed to Odaily Planet Daily: "I have to rely on my faith to support me."

"The small retail investors who entered the market at that time were the first to bear the brunt of this mining disaster." Aniu said that the timing of their entry led to higher mining machine costs and electricity prices. At the same time, as a large number of computing power poured in, the difficulty of mining also rose, which means that the income from Bitcoin mining decreased.

"They failed to control these factors well, resulting in the inability to make money and recover the investment in the bear market, and they will be even more unbearable if the currency price plummets further." Aniu said.

"I miscalculated." said Jiang Zhenqin, who purchased mining machines at the end of last year.

He originally expected to make back his investment in three months, but later he gradually realized that this wish was becoming a distant dream.

Mining machines are difficult to sell

With the miners leaving, life is not easy for upstream and downstream companies either.

Fan Xiaojun, head of sales for Bitmain in the Asia-Pacific region, said at a mining circle exchange meeting last week that mining machines are currently difficult to sell.

Liu Yelei, a mining machine dealer in Beijing, told Odaily Planet Daily that the new machines Antminer DR5 and Antminer D5 for mining Dash, which were just launched last week, are not selling well. There are fewer customers, and the rate of return is unpredictable. Everyone is waiting and watching. New machines are basically not selling well, but second-hand mining machines are still okay. Now the sales volume has basically dropped from thousands to hundreds of units.

Cyber ​​Plaza in Shenzhen Huaqiang North was once the largest mining machine sales market in the country. In its heyday, mining machines were basically sold from the third floor to the sixth floor. There was also a sign at the door of the computer accessories shop that read "Brand new and second-hand virtual currency mining machines for sale, spot special price!"

But now most people don’t do it anymore. The large group of people who once bought mining machines are gone forever, and the shops that are still open are deserted.

Zhou Qi, a mining machine middleman in Huaqiangbei, told Odaily Planet Daily that their profits have been very thin since the beginning of this year, and they are now sometimes making losses and sometimes making profits.

"We basically won't stock up a lot of computers, and the prices will also be reduced by a hundred yuan or so. Overall it is still controllable. Some of those who can't hold on will go back to selling computers." Zhou Qi said.

The situation of the mining pools downstream of the mine is also not optimistic.

Earlier this month, the BTCC mining pool, which was ranked among the top three in the world two years ago, announced its closure. The main reasons were that it had few customers, too little computing power, could not mine blocks, and suffered increasing losses the more it mined.

Although not many mining pools have directly announced the suspension of operations, according to statistics from the Plain Language Blockchain, there are 17 mining pools that have not produced any blocks in the past month, which means that they are all facing losses.

“The remaining mining pools are trying every possible way to find customers,” Sichuan mine owner Jia Hao told Odaily Planet Daily.

Many people in the industry have heard that Poolin (whose computing power accounts for 7% of the BTC network's computing power) and DPool have started a quarrel over miners.

According to industry insiders, the reason was that Longchi snatched the customers of Biyin at a slightly higher price, commonly known as "stealing computing power." Therefore, in the early morning of November 21, the two sides had a dispute in a miner group.

Some colleagues sighed that this was really an extraordinary measure for extraordinary times. At this juncture, although the number of customers was not particularly large, it still angered the party whose goods were stolen.

Big players are cleaning up the battlefield, is this the "golden period" for bargain hunting?

Unlike small miners who are leaving the market, some large mines and capital parties are now taking the opposite action.

An industry insider told Odaily Planet Daily that those big investors who still have enough funds to turn around are now waiting to "clean up the battlefield", and some "strong players" are even preparing to place heavy bets.

"One more person leaving means one less competitor for computing power. Miners who can persist during this gap can increase the proportion of their own computing power in the entire network, that is, the probability of producing blocks," he said.

"I know a mine owner in Xinjiang is planning to install 200,000 kilowatts of capacity, and everyone in Dazhuang is desperately trying to build up machines," Jiahao told Odaily. According to estimates, based on the 2kW of an ordinary mining machine, the Xinjiang mine owner Jiahao mentioned will install about 100,000 mining machines.

Judging from the current computing power situation, although countless retail investors have shut down their computers, the overall computing power of major currencies such as Bitcoin has not dropped much.

On November 23, Bitcoin's total network computing power dropped to 38.765 EH/s, a new low in nearly four months. But in less than a day, the network computing power recovered to 45.14 EH/s.

The founder "Shenyu" said at a mining circle exchange meeting, "These few days are the largest computing power retracement period in the history of Bitcoin." While controlling costs and risks, everyone should not miss this rare "golden period."

"It is undoubtedly important to have a steady cash flow at a time like this," said Jiahao, who was still insisting on running the machine.

Jiahao had encountered cash flow problems before, so he invested in a medium-sized truck transport team when he had sufficient funds. "This business has a stable income, which is also a kind of support at this time. At least it can increase the courage to make losses."

"Li Xiaolai calls this the ability to make money off-site," said Zhize, another individual miner who has not yet turned off his machine.

Zhize got electricity at cost price from his college classmates, so he is still profitable. Even if the price of the currency drops to the point where he really needs to shut down, he is not afraid, because he still has a stable job in a leading Internet company.

In addition, Dong Yu, a mine owner in Xinjiang, revealed to Odaily Planet Daily that some traditional industrial capital has entered the market this year, investing 500 million to 1 billion yuan in mines in Xinjiang and other places. Even if there is a bear market, there are capital and means to withstand the decline in the price of coins. "As long as you have coins in your hands, money will not be a problem (in the future)," he believes.

Ah Niu also has his own judgment. "We predict that this bear market will last at least 3 months to 6 months. The ones who can survive this liquidation are the big players, which can be said to be those who have both mining machines and cheap electricity. Mining machines alone cannot mine. Such a market does not allow for the emergence of middlemen who make money from the price difference of electricity. This 'mining revolution' may be about the producers such as miners."

The popular "champion" of the miners' misery competition is rumored on the Internet

Today, the retired miners are still making jokes online.

“Miners don’t pay much attention to the price of coins now.”

"It has come to this point, so my mentality has stabilized."

"We are just playing World of Warcraft now, so we should watch, listen and talk less about the price of the currency. What else can we do? Should we really join the group's miserable competition?"

Aniu believes that behind the miners' helpless jokes is a "mining reshuffle" that has been brewing for a long time.