As the price of coins falls and mining accidents occur, Huaqiangbei mining machine sellers sell their products at a loss

"Cutting flesh with tears."

Mr. Wang, a mining machine seller at Huaqiangbei SEG Plaza, the world's largest mining machine distribution center, described the current situation this way. Mining machine sellers made money from selling mining machines when Bitcoin soared, but are now experiencing "mining disasters": Bitcoin keeps falling, and the price of mining machines has fallen accordingly, leaving them with mining machines they bought at high prices.

"Mine accident" occurred

A3 is a limited edition mining machine released by Bitmain on January 17, 2018. The factory price is set at 20,800 yuan, and 6,000 units are sold domestically and overseas.

With supply outstripping demand, the price of A3 has soared. When the reporter from China Business News came to Huaqiangbei SEG Plaza on January 24, the price of A3 was about 40,000 yuan. On January 26, it was sold at 45,000 yuan. But as Bitcoin continued to fall, the price of A3 began to fall after January 26, with a "one price a day" drop of one or two thousand yuan a day, and now it is only about 30,000 yuan.

Mr. Wang told the First Financial reporter on February 4 that selling mining machines now is not profitable, but rather a loss. "It's the Chinese New Year, and the mall will be closed on the 10th. I have a lot of inventory on hand, and I want to sell it. I wonder if the price will drop again... I still have more than 40 S9s, but I actually sold them three or four days ago. The price of S9 drops every day. The other party paid the deposit, but has been hesitating about when to pick it up."

There is such an example in Huaqiangbei. The buyer paid a deposit (the deposit ratio is generally 30% to 50% of the total price, and most of them pay the full amount), but when picking up the goods, he found that the price of the mining machine had fallen by more than the cost of breaking the contract (the deposit), so he simply broke the contract and placed another order based on the latest market conditions.

Unlike the limited supply and sudden popularity of the A3, the Antminer S9 is a continuously popular mining machine. It has appeared in the Huaqiangbei market since the earliest days of mining machines becoming popular, and has been highly sought after. With the price drop of the leading virtual currency Bitcoin, the S9 is also unable to escape the fate of falling in price.

"The S9 was first sold for just over 20,000 yuan. The most expensive price was around 34,000 yuan in late November and early December 2017. Some people sold it for 35,000 yuan. Now it's around 20,000 yuan," said Xiao Sang, who sells mining machines at SEG Plaza.

Merchants who are willing to take risks and order futures from the official website when the market is uncertain can sell the mining machines at a high price, and can sell one machine at multiples of the purchase price, making tens of thousands of yuan. In contrast, if they purchase and sell according to customer orders, they can only earn a few hundred yuan difference per machine, but there will be no inventory pressure, so there is zero risk.

The cost paid by the adventurers is too high. Just like stock speculation, once the market is cold after entering the market at a high price, the price of virtual currency will fall and the mining yield will become low, the price of mining machines will fall accordingly, and merchants will be locked in the mining machines in their hands. The merchants who were once envied by the former are now sighing.

The first mining machine to start falling in price was the Antminer D3 for mining Dash. It was one of the first batch of mining machines to circulate in Huaqiangbei and also the mining machine with the most drastic price fluctuations. With the precedent of the D3 price jump, almost all merchants rushed to ship.

In July and August 2017, when mining machines first emerged in Huaqiangbei, merchants were selling D3, and the price of D3 was just over 20,000 yuan at that time. D3 rose all the way to more than 30,000 yuan, and in late September and early October 2017, D3 began to drop in price, and the lowest price was several thousand yuan. The current market price is about 10,000 yuan.

The rate of return determines the price of mining machines

"It would be enough if the price of A3 drops to more than 20,000 yuan. That is the factory price, and it is still a bit high now." Mr. Wang told reporters.

How should mining machines be priced? On the one hand, mining machines are affected by supply and demand; but more importantly, mining machines are investment products. The ultimate goal of mining machines is to generate income through mining. Discounting future income will be a reasonable price for mining machines.

Take A3 as an example. Although the price was double the factory price 10 days ago, from the perspective of yield, purchasing A3 is still a very cost-effective investment. At that time, mining with A3 could generate more than 2,000 yuan a day (the efficiency of the mining machine decreases day by day). Even if it was purchased for 40,000 yuan, it could be recovered in less than 20 days.

Bitmain has the most say in pricing mining machines. Bitmain has more than 70% of the market share of Bitcoin mining machines, and its founder and CEO Jihan Wu is known as the richest man in Bitcoin. In addition to Bitcoin mining machines, Bitmain also produces Litecoin mining machines and Dash mining machines. In the eyes of merchants and miners, Bitmain prices mining machines based on yield.

On January 28, Bitmain opened the second batch of A3 reservations on its official website, with delivery time from March 20 to March 30. The second batch of A3 has the same configuration as the first batch of A3, but the price is only 7,000 yuan, which is one-third of the first batch. However, merchants and miners tacitly accept the rationality of this price. Digital currency is in limited supply, the amount of coins is decreasing, and the number of mining machines is increasing. The mining capacity of the second batch of A3 will be lower than that of the first batch of mining machines, and the buyers' income will also be lower than that of the first batch of A3 buyers. Therefore, the price of the second batch of A3 can also be accepted by merchants and miners.

However, the price of virtual currency fluctuates every day, and the price of mining machines also fluctuates dramatically. No one can predict the future price of virtual currency, and the calculation of mining machine yield becomes delicate.

In the "mining disaster" of 2018, the mining machines dropped in value along with the virtual currencies. As the leader of digital currencies, the price of Bitcoin experienced a cliff-like drop in late January and early February 2018, falling below the $8,000 mark at one point, a 60% drop from the peak of $20,000 last year. Other altcoins also fell. As of 1 a.m. on February 3, the global cryptocurrency market value shrank by more than $100 billion in 24 hours. The yield of mining machines has become lower, and the price has naturally plunged sharply.

"It would be great if Bitcoin could go back up," Mr. Wang said when chatting with a customer. But will Bitcoin go back up? What disappoints merchants is that virtual currencies are facing stricter regulation around the world.

The United States is the headquarters of Bitcoin trading, but now the US government has begun to investigate tax issues in Bitcoin trading, mining and payment. Three large commercial banks banned users from using credit cards to buy cryptocurrencies in early February this year; Lloyds Banking Group, the largest mortgage bank in the UK, also banned its customers from using credit cards to borrow money to buy Bitcoin and other digital currencies on February 5. On February 4, the People's Bank of China will take a series of regulatory measures against domestic people who turn to overseas platform websites to continue to participate in virtual currency transactions.

On the other hand, Huaqiangbei is a magical place. A merchant once told a reporter that Huaqiangbei often has inexplicable things that become popular. Merchants who catch up with this wave of popularity can make money from it, while those who don’t may lose their investment. "It’s like there is an invisible big hand controlling it." The merchant said.

This big hand is the market. Some people can make money from this wave of market, but some people lose everything because they are one step late.