Chinese Mining Operations Reportedly Closing Due to Crashing Crypto Markets
November 27, 2018 by Ian Edwards
The plunging price of bitcoin and other cryptocurrencies may be forcing some Chinese mining operations to turn off their machines, according to a new report. With mining becoming less profitable, or not profitable at all, some miners are simply ceasing operations.
Also read: Edward Snowden Slams Bitcoin, Consensus Algorithms
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Some Chinese Mining Firms Halting Operations
Citing anonymous sources, Chinese media outlet Caixin reported on November 26th, 2018 that some companies in China have stopped mining cryptocurrencies like bitcoin (BTC) due to the recent fall in crypto markets. It appears that the current of price of BTC, around $3,700 USD on November 26th, is not high enough to support profitable mining for at least some mining operations.
However, firms in some regions of China are continuing to operate. Evan Yu of crypto mining firm Mining Sea, which has facilities in the Inner Mongolia autonomous region as well as Yunnan and Sichuan provinces, told Caixin that his company was still running its mining machines.
Yu added that his firm could also “acquire more coins as others have temporarily stopped running their machines.” Such a temporary shutdown could be related to the BTC difficulty adjustment, which is set to happen in a little less than a week, per Bitcoinity.
Difficulty At Play
Difficulty adjustments on the BTC network occur around every two weeks in response to the amount of hash power on the network. Bitcoinity is predicting the difficulty of bitcoin will drop by ten percent at the next adjustment. At that time, it will be easier to profitably mine bitcoin, so miners who have stopped may join back in again.
After a relentless increase for most of 2018, BTC’s difficulty reached its all-time high on October 3rd, but has dropped by more than ten percent since then. That increase reflected the increasing amount of people bringing new mining power to the network throughout 2018.
It may seem odd that miners kept bringing more machines online despite BTC and other coins dropping steadily in value throughout 2018. This lag is due to the time it takes firms to set up mining farms. Much of the hash power brought online was planned in late 2017 and early 2018, when cryptocurrency valuations were approaching all-time highs that, in retrospect, look clearly like a bubble.
As noted above, the decline in difficulty began in early October, when the value of BTC was relatively stable and well before the sharp declines that began in mid-November. This likely means that BTC difficulty will continue to drop in the months ahead.
Break-even Point
F2Pool, which is the fifth-largest BTC mining pool, has been releasing estimates of the price point at which various cryptocurrencies can be mined profitably on different machines, known as the break-even point. According to a graphic put out by the F2Pool Telegram group, BTC can be mined profitably by some machines at prices as low as $2,160 USD, assuming an electricity cost of $0.06/kwH and mining difficulty and coin prices as of November 21st.
Some mining machines are still operating profitably at $3,700 BTC, but for many older machines, such as the Bitmain Antminer S7 or the Canaan AvalonMiner 741, the break-even point is much higher. As a result, many of these older machines are no longer profitable to run. Also, operations with high power costs will become unprofitable sooner than for companies which have access to cheap electricity.
Bitsonline has visited facilities of both Canadian-Israeli mining firm Bitfarms and Bitmain, each of which have secured agreements for low-cost hydroelectric power in regions with cool climates. It’s unclear what the break-even point for those operations are, but both are using primarily Bitmain S9s and have electricity costs likely below $0.05 kwH.
Yet, not all operations run so efficiently, which leads to videos like this one from Twitter user Dovey Wan which purports to show a Chinese mining site throwing out old mining machines:
BRUTAL: this is what’s happening now in a China based mining site …. ?? pic.twitter.com/gcN4lVTyBt
— Dovey Wan ? (@DoveyWan) November 20, 2018
So what do you think? Will less profitable mining operations permanently shut down?
Images via F2Pool, Pixabay
