This week the cost of Bitcoin (BTC) flooded over 15%, arriving at a high at $7,200 before pulling once more into the $6,800 territory. In spite of the recuperation, Bitcoin still has a best approach so as to come to the $8,000 level seen before the coronavirus-activated selloff on March 12.
The drop had a few outcomes on the Bitcoin arrange. Having reached the $3,800 value go, the highlighted drop constrained some Bitcoin excavators to quit and close down their tasks because of mining getting unrewarding.
As diggers have facilitating and power expenses to stay aware of, frequently depending on the momentary yields of their hardware, the value prompted the greatest trouble drop since 2011. Be that as it may, it appears the coronavirus and the lofty drop in the estimation of Bitcoin may have influenced a few areas more than others.
Chinese miners go dim
As was as of late announced by the Chinese distribution Securities Daily, in excess of 40 built up mining tasks have been compelled to close down as an enormous number of Antminer S9s, a more established age of Bitmain’s mainstream Antminer items, have gotten unfruitful. An industry insider told the production that “generally 2.3 million Antminer S9s have been closed down since March 10,” as indicated by information from F2pool.
This drop in the cost of BTC appears to have influenced Chinese excavators the most because of the measure of S9s and old-age hardware that have gotten unrewarding to continue utilizing. Power costs for diggers in China extend from $0.03 to $0.05 per kilowatt-hour. In any event, for excavators with power at middle paces of $0.04 per kWh, diggers need Bitcoin to be at $5,136 to be beneficial.
Matt D’Souza, the CEO of Blockware Solutions, told Cointelegraph:
“The drop was several old generation rigs going unprofitable. If you monitor the pools. Many of the Asian pools lost hash, not the American pools. That signals it were machines in the East that shut down, not North America. It was old gen equipment out East. It was ultimately the price of Bitcoin dropping and machines becoming unprofitable and forced to shut off.”
Impact of coronavirus on China-based miners
Not only has coronavirus affected miners indirectly through its effect on the price of Bitcoin — and just about every other asset class — the pandemic has also affected the area more broadly and made machines harder to come by as supply chains have been disrupted. D’Souza explained:
“I think COVID has influenced hash rate drop because it has disrupted global supply chains. So miners are not getting rigs quick enough. The difficulty adjustment was much greater because next-gen rigs have been delayed due to COVID-19.”
The pandemic has also had a considerable effect on the secondhand market for mining equipment, which has always been a well-known subset of the mining industry. Wu Tong, the deputy director of the Blockchain Commission within China’s Ministry of Commerce, has already observed this first hand. He recently told Securities Daily:
“Under the influence of the epidemic, the difficulty of maintaining, renewing and continuing production of mining machines has further increased, and the 12.04 price plunge has put many mining machines on sale. The tide of mining machine selling has already occurred, and the average selling price of each mining machine is 30%–50% lower than before the Spring Festival.”
Why miners may move away from China
China has been the market leader when it comes to mining for a long time, with studies showing it collectively controls a majority of the Bitcoin hash rate. China’s dominance is owed mainly to the country’s low electricity prices and leading manufacturers, such as Bitmain and Ebang.
These conditions not only allow more advanced Bitcoin mining operations to access new generation equipment quickly and cheaply but also for smaller operations to make use of old equipment for longer and acquire it at lower prices.
However, as Bitcoin continues to mature and gain interest among investors, other countries may have a different set of characteristics that make it more viable for mining.
Pros and cons of mining in the East
Countries like Venezuela that have even cheaper electricity and other subsidized energy sources often end up receiving old mining equipment like the aforementioned Antminer S9. But the price is not the only factor, as internet speeds also give countries like the United States an edge.
Higher purchasing power and the ability to raise capital may allow new miners in Western countries to access new-generation machines and to stay ahead of the curve. This is the case with Blockware Mining, which has kept its 180 petahash per second mining operation up and going despite higher electricity prices in the U.S.
Moreover, the Chinese government has not shied away from its dislike of cryptocurrency and Bitcoin mining. The country has a track record of cracking down extensively on exchanges and many illegal mining operations. The U.S., on the other hand, has been ahead of the curve when it comes to regulating the cryptocurrency industry, which may prove to be a decisive factor in the future.
It has certainly proven to be so for companies like Bitmain and Ebang, which have submitted listing applications to the Hong Kong Stock Exchange but have not heard back.
A pivotal moment for mining
Overall, it’s possible that we may see a shift in the mining industry, especially with moments like the halving and the ongoing pandemic.
The hypothetical decentralization of the industry would be welcome, as many have expressed concerns when it comes to the centralization of Bitcoin mining. But for now, China continues to take the lead.