Why Chinese Miners are in a Frenzy over Used Bitcoin Mining Rigs
Chinese crypto miners are in a frenzy over pre-owned bitcoin mining devices following the recent price upsurge that saw the lodestar digital coin’s value rise from sub $4,000 figures to just over $5,000 within 48 hours.
The sudden change in market trajectory has revived the use of previously discarded miners as mining profitability rises to sustainable levels. According to a new Diar report, miners raked in just over $290 million in April, an almost 30 percent increase compared to earnings posted in March.
And now, according to Coindesk, the prices of used mining rigs have more than doubled since April. Bidding wars over the equipment are largely to blame for the trend. AntMiner S9 units, for example, retailed at $140 before the crypto market uptick but now cost upwards of $250. Some buyers are currently making $320 orders and this is pushing up benchmark prices.
There is credible suspicion that some wholesalers are stockpiling as they wait for rates to go higher. The trend could create an artificial shortage if left unchecked.
The situation is further exacerbated by the slow production of new equipment by manufacturers. Companies are taking their time before shipping larger consignments and it may be months before things get back to normal.
Bitmain’s AntMiner T17, for example, was released in April but shipping will begin this month and prioritized on a first bought, first served basis. It features a 40 TH/s hash rate, improved stability and a 55J/TH power consumption efficiency.
MicroBT which recently launched its WhatsMiner M20S mining hardware is also set to ship about 1,500 units this month. The device has a computation rate reaching 70TH/s. According to the company’s founder, Zuoxing Yang, shipments of over 10,000 units will most likely begin in July and August.
As such, secondhand mining device traders are taking advantage of the window period to substantially increase their sales margins.
Miners Maximizing Profitability using Used Rigs
Michael Zhong, a crypto analyst at TokenInsight explains that the main goal for most miners is to attain a payback period of approximately 200 days. This for them is a safe bet given the tempestuous nature of the crypto ecosystem. The objective is also highly achievable using used mining devices since they are low-priced.
The reality, however, is that the trend is pushing up equipment prices and increasing the payback period beyond the expected 200-day mark.
The Sichuan Wet Season
The current rush in China to acquire crypto mining machines has been catalyzed by the Sichuan province wet season. The region is a major draw for miners because of its cheap power usually available during summer.
It recurrently has an abundance of cheap hydroelectric energy during this time because of the heavy rains. The reverse occurs during the dry season when Chinese miners migrate to other locations in the country. Before the bitcoin price boom that occurred in 2017, it was estimated that over 70 percent of bitcoin’s hashrate stemmed from farms located in Sichuan province.
The region is supplied by four major rivers, Jialing, Tuo, Min, and Jinsha (or Wu), which power its hydroelectric facilities. Energy costs fall significantly during the wet season reaching $0.01 per kWh but easily exceed $0.04 per kilowatt during the dry season. Summer begins in May and ends in August.
According to analysts, the number of mining machines in Sichuan is likely to hit the one million mark this time round, subsequently increasing the mining hashrate on crypto networks. Bitcoin’s hashrate is expected to exceed the all-time high record of 60 terahashes per second as the season stretches on. The network’s current load is at approximately 50 TH/s.
The Bitcoin Halving Event
Bitcoin’s halving event is going to happen in approximately 12 months from now and most likely on May 24 next year. It will lead to a drop in mining reward per block from 12.5 BTC to 6.25 BTC. The event will have a significant effect on the cryptosphere as mining difficulty will increase substantially causing profitability to decrease.
This will cause heightened demand for the digital coins in circulation, thereby increasing their value. The price of bitcoin is expected to climb as the event draws near.
Miners expect that the halving phenomenon will boost their digital asset fortunes.
(Image Credit: Pixabay)
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ABOUT THE AUTHOR
ABOUT THE AUTHOR
Elizabeth Gail is a crypto-enthusiast and blogger. Her specialties include cryptocurrency news writing and analysis. When not writing about crypto, she’s out taking part in humanitarian endeavors across the world. For any news tips or coverage, you can reach out and engage with her on Twitter at @Lizbarret001. You can also email her at elizabeth.barret (at) yahoo dot com.