Who Is Buying Those Obsolete Bitcoin Miners Dumped at $20/kilo in China?
Following the recent crypto market crash, many China-based crypto miners are offloading their mining equipment and reselling them like scrap by the kilos instead of price per unit.
Reports of mining rigs being sold by weight have been spreading like wildfire within and outside of the country. The phrase “miners sold by kilo” even once topped the trending topics on Chinese search engine Baidu.
Bitcoin miners were among the most mysterious groups in the crypto space at one time. They are the guardians of the blockchain world and the first to enjoy the overnight wealth dreamed by outsiders. While the knock-on effect that the current crypto bear market is having on the mining industry is great huge – the has-been top three mining pool BTCC stopped operation; world’s second-largest mining device maker Canaan let its IPO application lapse; famous U.S.-based bitcoin miner Giga Watt filed for bankruptcy; and in China miners sold by kilo.
Many bitcoiners unsurprisingly dismissed the tense situation in China as FUD. Regarding this, F2Pool founder Mao Shixing, better known as Btcfish, an early bitcoin adopter and top Chinese crypto influencer, said this is what’s happening among miners in China in an interview with a local crypto news outlet.
Miners are dumping their rigs, is it true?
Btcfish: Yes, it is true. It’s said they are sold at 140 yuan per kilo (roughly $10/lb).
Note: a bitcoin mining device, take Antminer S9i for example, is about 5.5 kilogram in weight, Calculated based on the rumored price, it’s resold at just 770 yuan ($110/unit), while a year ago the S9 was hyped up to 20,000 yuan ($2,880) at one time.
Why does this happen?
Btcfish: The mining market is now under triple pressure.
- The most pressing problem is that hydropower plants in southwest China are experiencing a dry season as winter comes in the country, which means the electricity charge will rapidly rise for mining farms residing there;
- The second is that mines are in need to upgrade their mining equipment. The S9 miner has been around for 3 years, which is quite a long life for a miner. Older mining rigs are losing their value over time.
- Besides, the recent plummet of bitcoin price has squeezed out all the profit margins, what a rig mines can no longer recover the power cost and operation expense invested.
Any rational operator would shut down their miners in such a situation as they can directly buy more bitcoins with the cost they invest to mine.
Will these bitcoin miners quit forever?
Btcfish: No, because the cost of bitcoin mining is dynamically adjusted. If 10% miners choose to turn off their machines, mining cost will decline, and profit for those remaining miners will relatively increase.
Where are those obsolete mining rigs going? Are they really sold to scrap metal collectors?
Btcfish: Of course not. Most of the rigs are being shipped to places with cheaper electricity, such as the Middle East region.
What’s the electricity price in the Middle East?
Btcfish: It’s actually at a cost of only 0.03 yuan/kWh ($0.004/kWh) as fiat money there are depreciating. An M3 running 24 hours can earn 0.3 yuan a day, which, for miners based in China, is losing money, but in the Middle East, they can still earn 0.2 yuan with all costs taken into account, it is actually fairly high in these days.
Since they can earn more, why didn’t these miners go to the Middle East before it?
Btcfish: Prior to the slump of bitcoin price, miners could get good profits at home. However, if they move to abroad, they would face many risks, even risk their lives, considering the turbulent political situation there.
Are domestic miners moving there, or miners from the Middle East coming to China to recycle the mining devices?
Btcfish: It happens in both cases.
Will the bear market have a great impact on the mining sector?
Btcfish: Yes. Bears drive the industry to optimize its industrial structure. For example, we mine bitcoins in industrial estate with electricity price at 0.6 yuan/kWh before 2015, after the suffering bear in that year, we moved to places in the southwest and northwest China where electricity price was much cheaper ranging from 0.2 yuan to 0.3 yuan/kWh. And this time, I believe, would also bring an upgrade to the industry and lower the cost of mining, which is actually an opportunity for the mining sector.
When do you think the bull will come?
Btcfish: The market is unpredictable, what we can do is to take advantage of it.