According to recent reports, local Chinese governments are supporting bitcoin mining. Now, with the rainy season here, the extra power supply has driven its prices down to 0.20 CNY or around 3 USD cents, noted 8BTC co-founder.
Local government in Sichuan released supporting policy for #blockchain# mining. As rain season is coming, extra supply has driven power price down to 0.20 CNY or around 3 USD cents. https://t.co/Mv1B0Txa2G pic.twitter.com/mLK0JzeqOJ
— Red Li (@redtheminer) April 28, 2020
Yaan, a city in Sichuan known for abundant water resources prolific bitcoin mining, last week issued government advice on “the construction of a hydropower consumption demonstration zone to support the development of the blockchain industry.”
The implementation advisories were jointly issued by the Municipal Economic and Information Bureau and the Municipal Development and Reform Commission aimed at deepening the power system reform.
The idea is to enable the companies to seize major strategic opportunities for the industry’s development and promote its healthy and orderly development. Moreover, the local government aims to promote the high-quality consumption of hydropower resources and cultivate new growth points for the city's economic development.
A Blockchain Industry hub
The city, which is estimated to account for more than half of the Bitcoin network’s computing power, in its likely first public guidance to grab the “strategic opportunity of the blockchain sector” is intent on helping the companies consume the excess hydropower electricity of the area.
Although bitcoin mining is not specifically mentioned, the report from April 20th seeks to establish itself as “an impactful blockchain industry hub,” a shift from last year’s guideline which identified bitcoin mining activities as an industry that should be eliminated.
China’s Sichuan region always goes through the issue of excessive hydropower electricity being wasted during the rainy summer season, from June to August.
With abundant cheap electricity from excessive hydropower, the city is emphasizing the blockchain companies on using the power plants integrated with the state grid.
Cheap Power may Offset Halving Woes
With Bitcoin's halving just around the corner in less than two weeks, miners aren’t really keen on investing. After recovering from the March sell-off, the price of bitcoin has been hovering around $7,700 since the weekend with the breakeven cost at $7,300.
Halving means the miner inflow will be cut in half to 900 BTC per day while the breakeven cost rising to $15,100, as per TradeBlock. The question of whether to buy new and more powerful mining equipment or not depends on the price of bitcoin post halving.
Bitcoin at its current price could force more miners, especially over-leveraged miners to shut down their operations. But more reduction in electricity prices in the next few months could help them to keep on operating with positive margins while the price goes back to profitable levels.