The Chinese wave of bans on cryptocurrencies is causing some turbulence. How the Bitcoin Ban Affects the Mining Industry.
The mining industry is currently under a lot of pressure. Above all, China is causing previously unimagined upheavals in the market these days. There are two reasons for this: First of all, the People’s Republic banned mining almost overnight in June of this year. The background to this is still nebulous. In the scene, however, advanced environmental concerns and increasingly frequent power outages are considered possible reasons for the bang of the government. Elon Musk also adheres to the latter theory, as the Tesla CEO explained at CodeCon.
Second, it has been clear since September 24th that the mining ban was only the harbinger of an unfortunately consistent plan to ban cryptocurrencies like Bitcoin entirely from the country. Because – as we already reported at this point – private crypto transactions have been banned for about a week and even foreign stock exchanges will no longer be allowed to do business in the Middle Kingdom in the future. This is not good news for crypto-related companies based there. And even companies that only touch the periphery of the sector will open a hole with the crypto ban. Alibaba, for example, “becomes […] ban the sale of miners for virtual currencies ”, as the company writes in a blog post. Anyone looking for miner equipment now should have a hard time, said Peter Marggraff, Managing Director of Crypto Supply, a local mining company, to BTC-ECHO:
Due to the elimination of mining equipment on Alibaba, there is currently no marketplace where you can reliably buy hardware.
Price pressure on the ASIC market
There is currently no sign that the mining sector will recover from the turbulence anytime soon. On the contrary: Since the beginning of the third quarter, the prices for mining devices, so-called ASICs, have risen by an average of 25 percent. Compass Mining writes that all in one Blog post.
The reasons for this are complex. On the one hand, the crypto industry is not spared from general delivery bottlenecks. On the other hand, Bitmain, arguably the largest manufacturer of mining hardware, is based in China – and it is obvious that this is not a beneficial location. The Antminer S19j Pro, for example, currently costs $ 9,300; many other devices are already out of stock and will not be available until early 2022 at the earliest.
And so it does not seem surprising that many competitors rely on competing products such as the Whatsminer M20S. Great American Mining, for example, will have a whole range of the devices in North Dakota as early as 2020 placed and uses stranded energy there to mine digital gold. But they are also current not to have. The fact that miners are becoming more and more expensive also has to do with the rise in the Bitcoin price in the third quarter of this year. Because as soon as the price rises, the demand from miners for new equipment also increases. At least that’s what Blockstream CSO Samson Mow told the Bitcoin Magazine.
Miner cheaper again soon?
On the other hand, the price trend could even go in the other direction in the medium term. Because as BTC-ECHO has found out, a real glut of old devices is to be expected on the used goods market. “Mining hardware will soon be cheaper again, as suppliers would like to sell their stocks due to the uncertainty in the market. The suppliers simply sense the uncertainty that prevails in the market, ”says Marggraff in an interview.
That would not necessarily contradict the ongoing price dynamics on the ASIC market. New Bitmain devices are not available because large farms place their orders on a long-term basis and had already bought a lot before the ban.
The stocks of Bitmain and Co. have been sold out for weeks because there are still big players in China who stock up on hundreds of devices in advance and thus also dominate the prices. Due to the ban in China, however, these devices could soon be sold again cheaply.
In the end, opposing tendencies are visible here: On the one hand, large orders from Chinese miners in the run-up to the ban and, on the other hand, an increase in stocks on the secondary market and general uncertainty on the market, which could soon cause prices to shrink again.
Rearrangement of the hashrate
It is astonishing, however, that the Chinese leadership has not yet been able to completely wipe out mining in the country. Because global events are still dominated by Chinese pools. At least that’s what a look at btc.com suggests; places one to four are occupied by Chinese mining pools.
However, that does not have to mean that the mining equipment is actually in China. AntPool, for example, also has farms in Malaysia. In addition, the principle of mining pools means a decentralized distribution of the actual hardware, which is then only bundled in the respective pool. But it is also conceivable that even authoritarian China cannot put an end to such a huge industry overnight. Just recently, for example, we received news that the Chinese authorities had confiscated 10,000 devices in Inner Mongolia that had continued to mine for months despite the ban.
In the end, it is currently not entirely clear how the industry will develop after the China shock. However, there is a chance that Germany will now also be considered as a mining location due to the expansion of renewable energies. For this to happen, electricity prices would have to drop significantly.