Crypto Miners in China Feel the Effects of Downward Bitcoin Price Action as Equipment Gets Cheaper
The 2018 cryptocurrency bear markets seem to have continued into 2019. Bitcoin’s price is still ranging below the $4,000 mark; this is quite low compared to its all-time high of $20,000 as 2017 came to an end.
This trend may have some fundamental impact on blockchain and crypto projects both positively and negatively. While developing firms have embarked on ecosystem improvement, miners and crypto mining machine producers have experienced significant reductions in their market shares. One of the most affected countries is China where a good number of its young population had invested in digital currency mining.
Bitcoin’s bubble has forced a majority of these young entrepreneurs to move back to their native homes after failing to break even. A good example is 24-year-old, Lu Qing, a crypto mining participant who was located in Delingha but has since moved back to Jiangxi Province. The business atmosphere in crypto mining after the market struggles in 2018 became unbearable hence calling for automatic closure. In addition, the Chinese authorities cracked down on crypto trading making it harder to move funds within this industry in the past year.
The crypto mining business model is designed to facilitate validation of transactions while miners make money by contributing power for the operations. Lu’s business was supported by the power supply from a private entity and had accumulated up to 7,000 crypto mining machines by Q3 of 2018. Furthermore, the young man was also operating mining machines on behalf of individuals or other entities.
Initially, Lu vision was to expand his crypto mining business to a capacity of 12,000 machines but did not go as planned owing to the crypto market downtrend. However, the business had continued to break when the market first signaled a probable reduction in prices. This was mainly due to the availability of cheap power in Qinghai given the region is rich in renewable energy.
The tipping point came when BTC broke its $4,000 support level to trade below this mark for a while. Today, Lu is not the only crypto mining victim due to the crypto market plunge. One can find crypto mining machines for as low as $59/400 yuan in China’s Shenzhen district. This is far below the initial selling prices that could fetch $30,000 for one machine.
Crypto mining machines have also had their own bubble as a result. Investors had hopes that these assets would make them quick money in crypto but turned out not to be the case due to the margins on electricity costs. They have since been forced to abandon the machines making them lose value greatly in the past months.
Bitmain, a top company in crypto mining machine production, has not been spared by these events in crypto price action. The company’s aggressive approach to a point of listing in Hong Kong is now slower after an approval setback. Statistics, however, show that it has become more complex to solve the network consensus due to new market entrants in the crypto mining arena.