Industry News Bitcoin Miners seem to be gearing up for more Business

Bitcoin Miners seem to be gearing up for more Business

March 5, 2019

Miners based in mainland China are once again buying used BTC mining rigs and other equipment, as well as making deals. These include other mining farms and hydroelectric plants. Analysts believe that the abundant water expected this summer will push the business back into the profitable space. It is already known that the season produces a significant amount of additional electricity in the hundreds of hydro power plants and stations.

This is especially true for the facilities in the southwestern provinces of Yunnan and Sichuan, where numerous mountains are located. The level of extra power provides competitive bills for electricity that bitcoin miners get. This makes the season a rare opportunity to earn a higher profit margin than that of the current bear market can otherwise provide.

The numbers are clear for some companies. Hashage is one such business in the city of Chengdu. It operates six farms that can supply around 200,000 sloths for rigs and they have a precise calculation for the upcoming period. During the summer months, the price of a kilowatt-hour is about 0.25 yuan. This is around $0.037 and a really low price – by comparison, an average kilowatt-hour in the US is $0.12.

Rising Interest

Zheng, the CEO of Hashage believes that there is a growing interest in the mining operation. According to him, miners are slowly moving their focus to the Xinjiang and Inner Mongolia provinces where they can operate mining farms that run on fossil power. The costs of these operations run around 0.35 yuan or half a US cent per 1 kWh.

However, even a difference of just $0.0015 can make or break the bottom line for miners, especially when it comes to the market like the one today where a BTC token is worth $3,700. Bitmain’s AntMiner S9 rig uses about 30 kWh per day which is more than an average US household in 2017. The amount of power consumed is staggering when the returns are counted into the calculation. Here, a $0.045 savings per day means that a mining operation of 10,000 rigs saves over $13,000 each month.

Secondhand Gear

Another factor driving the revival in the industry is the fact that second-hand BTC ASICs are offered relatively cheaply. The same applies in particular to the ANtMiner S9s that can be attained using really modest funds. According to Zheng, there are used S9 rigs that can be purchased for $150 while they provide a capacity of 10 trillion TH/s. The same fact is seen in online sellers of S9s that are on the Alibaba marketplace. Here, rigs can be found for the price as low as $100.

The higher-priced models are sold for $200 each. A new S9 as sold on the Bitmain’s official website goes for about $450, but the wholesale dealers of the new S9 rigs are selling them for about $300. Other Chinese bitcoin entrepreneurs are pointing out that the previous round of miner shutdowns and busts took place at the end of 2018.

This flooded the market with rigs, especially the mentioned S9. As Tyler Xiong, the marketing officer of Bixin, the mining pool and wallet service noticed, these rigs are like AK-47 rifles in the world of weapon market – they offer the best performance over cost ratio and provide companies with a good alternative. In fact, many including Bixin are not considering any other option than to invest money in S9 and set up their own mining operations.

Diverse Business Setup

The range of possibilities that a mining company or a cryptocurrency company, in general, can attain with the power suppliers is big. That is why Zheng says that his company, asides from hosting machines for mines is also planning to put about 20,000 of its own ASICs to work. This would allow the company to generate both fiat and crypto profits at the same time. He also thinks that the positive climate will boost the hash rates of the entire bitcoin network this summer.

According to his assessment, the network rate could reach 70 EH/s (quintillion hashes per second). This number is well beyond the number of 61 EH/s that was recorded a year before in the summer of 2018. The growth is already visible in the network, especially in a previous couple of months. At the start of January, the rate as about 35 EH/s while it is currently about 42 EH/s on average. Now, Zheng believes that it is only a question of how many miners will be willing to take the bet on bitcoin in the coming months.

New Market Dynamic

While there are ample rains and water in many of the mentioned locations all of the time, this year there also appears to be a different kind of market dynamic. In a market geared towards the bills, there was a persistent difficulty in buying mining gear and locating slots in mining farms.

But, the price of electricity was not that big and getting into the actual operations was not an issue because the profits managed to cover the costs. In a bear market like the one now, the electricity means the positive difference between costs and profit that all of the miners are struggling to find. In other words, it is all about better utilization of resources and organizing together for that profit margin.

In an environment like that, those miners who can farm using the cheapest cost of electricity will be the winners. This also means that producers of new gear will not reap the benefits – GPU companies will need to sell their units to gamers and esports organization, not individual miners as before. Right now, the market for used rigs is so tightly packed that few will go for new units.

Government Response

In previous years, some news pointed towards the government of China clamping down on mining operations. Right now, there seems to be little if any concern about that issue, which points towards the option of the government turning a blind eye to the new operations. In that case, the upcoming summer will be able to take off many used mining rigs from the hands of the sellers and put some newly mined BTC tokens into the hands of Chinese crypto companies and mining operators.

Source: CoinDesk