Price increase of 730%! Bitcoin mining costs soar under China's policy

The rapid compression of profits and living space has caused Bitcoin "miners" to experience unprecedented oppression.

As China's regulation of the bitcoin mining industry has tightened, mining costs have also begun to surge. ViaBTC, the world's fourth largest bitcoin mining pool, announced on its official website on Friday that it would increase management fees for some customers from the previous 6% to 50%, a price increase of more than 730%. The price increase is mainly for the company's S9 contract customers, who use the S9 Antminer, which is said to be the most advanced and efficient mining hardware.

ViaBTC said in a statement, “Mineral resources in mainland China are becoming increasingly scarce, and some of our long-term partners are facing the risk of mine closures, which has also caused our cloud mining system costs to soar. In order to ensure the long-term normal operation of cloud mining, we have no choice but to adjust the management fee.”
Mining boom driven by huge profits

The sharp increase in management fees for major miners has once again focused on the huge profits in the mining industry. The Bitcoin mining industry is very profitable. According to Bloomberg New Energy Finance, even if calculated based on the current highest electricity tariff in China, as long as the price of Bitcoin is not less than US$6,925 per coin, the mining farms can make money.

According to the current cost, it is estimated that it will cost about 10,000-20,000 yuan to mine one Bitcoin, of which electricity costs account for a large proportion. For example, in a mining farm in Sichuan, the annual electricity costs of about 6,000 mining machines are close to 3 million yuan.

In addition, the intensified competition has led to thinning profits in mining, and the design of the Bitcoin block also indicates that the difficulty of mining is increasing. In the design of "Father of Bitcoin" Satoshi Nakamoto, the block reward will be halved every 210,000 blocks mined. At first, each block rewarded 50 bitcoins, but now it is only 12.5, and by 2020 it is expected to be only 6.25.
Encountering “policy exclusion”

After shutting down domestic bitcoin exchanges and banning initial coin offerings (ICOs) last year, Chinese regulators have taken a closer look at the bitcoin mining industry.

Earlier, there were reports that China was taking action to ban the domestic Bitcoin mining industry due to concerns about excessive electricity consumption and financial risks. According to Yicai Global, although the central bank did not require Bitcoin mining farms to shut down within a certain period of time, China's attitude towards regulating Bitcoin production and canceling electricity discounts for mining farms has been basically clear, and the regulatory authorities have also mastered the electricity fees, taxes, power generation and other information of some mining farms.

Central regulators instructed provincial governments to "actively guide" companies within their jurisdiction to exit the cryptocurrency mining industry. The directive states: "While consuming a large amount of resources, the bitcoin mining industry has also fueled speculation in 'virtual currencies.' Mining operations run counter to official efforts to prevent financial risks and curb activities that 'deviate from the needs of the real economy.'"
Bitcoin mining farm

Nicholas Ashworth, a stock analyst at Morgan Stanley, predicted in his research report on January 10 that the electricity demand for mining Bitcoin and other digital currencies will reach 120-140 terawatt-hours in 2018. Data from Digiconomist, an industry dynamics website, shows that the global mining industry accounts for 0.17% of total electricity consumption, which is higher than 161 countries.

China currently produces 70%-80% of the world's mining machines, which are mainly distributed in Xinjiang, Inner Mongolia, Sichuan, Guizhou and Yunnan. In an environment of increasingly stringent regulation, many Bitcoin mines choose to "go overseas". ViaBTC mentioned above has moved its mines to Iceland and North America.

Cheap electricity and low temperature climate are environmental requirements for cryptocurrency mining, so Canada, Iceland, Eastern Europe and Russia have also become gathering places for more mining pools.

Financial media CNBC reported that Wenatchee, a small town three hours east of Seattle, is becoming the center of Bitcoin "mining" in the United States. It has attracted 12 of the largest Bitcoin and cryptocurrency "miners" in the United States. Since the Bitcoin price soared in December last year, another 75 miners have applied to settle here. The electricity price here is extremely cheap, only 2 to 3 cents per kilowatt-hour.

As of press time, the price of Bitcoin is $13,114: