Chinese Miners Forced to Shut Down Their Businesses, As Cryptocurrency Prices Plummet

Omar Faridi
  • Cryptocurrency mining is no longer profitable for operators of small mining farms in China.
  • Local residents reveal they were forced to shut down their mining operations due to the extended crypto bear market.

A Chinese cryptocurrency miner with the surname Li recently revealed that he had invested “hundreds of thousands” of Chinese yuan (CNY) to purchase nearly a hundred mining rigs during the second half of 2017 - when digital currency prices reached their all-time highs.

Li also resigned from his job at a small financial firm and began focusing on his crypto mining business. As many digital asset investors have now admitted, Li had hoped to make some “quick and easy” money by mining Bitcoin (BTC).

Cryptocurrencies Drop 99% From All-Time High

However, the prices of all major cryptocurrencies have dropped drastically - with some popular crypto assets such as Nxt and Qtum losing as much as 99% of their value from the time when the market capitalization of the crypto market exceeded $800 billion (in January 2018).

Because of the huge drop in cryptocurrency prices, Li said:

By mid-June, my mining business’s profit margin had dropped by 90%. One of my friends who also mines altcoins suffered more, nearly losing all his investment.

Chinese Miner

After suffering huge financial losses, Li was forced to shut down his mining farm and he also tried to sell his mining rigs by posting an ad on an e-commerce platform for second-hand electronic hardware items.

However, Li struggled to find buyers for his expensive mining equipment as he claims to have not been able to find a party that has made a reasonable offer - even though it has now been three months since he posted the ad.

Useless Piles Of Scrap Metal

The Chinese resident also said he was only able to sell two mining machines for just 700 yuan (appr. $105). When he tried to sell the mining hardware equipment to other local electronics dealers, they also refused to take them.

At the time when Li had purchased the crypto miners, they were in very high demand and hard to get, however, he now describes them as useless piles of scrap metal that lie covered in thick layers of dust.

Another Chinese miner with the surname Ma revealed that he had to close down his mining farm as well, due to the extended crypto bear market. Ma said he then sold four of his mining rigs for only 850 yuan (appr. $125) - which is less than 25 percent of what a new machine costs.

Commenting on the significant drop in prices of mining hardware, Ma said that devices which had been introduced in early 2018 with computational [capacity] of “10 TH/s per chip” now only trade for around 1,000 yuan (appr. $150).

New Mining Equipment Cheaper Than Used Hardware

Also, mining equipment developed using newer technologies, which are now increasingly being offered by relatively small hardware manufacturers, can be purchased brand new for even cheaper rates than used equipment of equivalent computational power.

When crypto prices skyrocketed, the Chinese residents said that vendors selling digital currency miners could be found everywhere in Huaqiangbei, which is a popular electronics hub in Shenzhen, China.

A Shenzhen-based vendor said:

All of mining machines are [now] sold at a discount of 30%. If you want to buy more than one, we can offer a better price and will give you more power cables and associated accessories for free.

Chinese Vendor

Liang Sizhong, a local PC repair shop owner, said:

Mining rig retailers and miners, the sellers of second-hand miner components ... are … under tons of pressure as the price of used graphic cards [has dropped] sharply. [In most cases], we do not collect used devices for recycling.

Liang Sizhong

Blockchain & Real Estate: How Tokenization May Be a Game Changer for Investors and Owners

The real estate market represents one of the oldest and most significant investment classes. Real estate investments yield competitive returns and are particularly effective hedges against inflation, however, there have been several persistent barriers to entry, including the high cost of entry and low liquidity.

With cryptoassets emerging as a new asset class, their underlying technology - blockchain networks - have evolved to not only serve transactional systems but also confer, hold and transfer value in general.

As the industry and technology continue to develop, there is considerable room in merging the old with the new, and few areas hold potential equal to the tokenization of real estate.

Tokenization, as the name suggests, is the representation of an asset or equity, in token equivalents, which can be fractionally divided and owned.

A tokenized property would be akin to a real estate investment trust (REIT), but much more flexible and with very little middlemen fees.

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Unparalleled liquidity

Tokenized equities and real estate will witness unparalleled liquidity, given how the ease and secure settlement of cross-border transfers in tokens can take investment pools truly global.

Fractional ownership/Low cost of entry

Since tokens support fractional ownership, they considerably lower the cost of entry, further opening up the investor pool and unlocking developing regions and economies around the world.

Efficient administration/No middlemen

Tokenized securities can be further programmed for efficient administration - this is done via the use of smart contracts, which can easily send out dividends and support other functions, such as voting rights. Moreover, since all of these activities are recorded on the blockchain, management overheads are significantly reduced, middlemen are removed from the picture and costs are lowered for both investors and issuers.

Increased transparenc

Not only are blockchain networks secure, but they are also immutable and allow for increased transparency, where every transaction and value transfer is recorded on a ledger. Access to the ledger can be permissioned if required, and overall, blockchain implementations are flexible.

Current challenges to tokenization of real estate

While the prospect of tokenized real estate is quite attractive, its implementation is not without challenges.

First, there is a need for improved security practices and general awareness around the custody of digital tokens. Time and again, we see exchanges getting hacked and/or cryptocurrency owners losing their holdings due to security lapses as simple as phishing attacks and keyloggers.

Until institutional-grade custody solutions and exchanges become mainstream, the dream of tokenized real estate will be difficult to realize.

While there are several reputable platforms, such as Polymath and Swarm, they only take care of the technology end of tokenization. Before there can be any meaningful adoption, regulatory developments need to be made. Even when tokenized, real estate tokens fall under securities law, and compliance procedures need to be followed. Unfortunately, there is the feeling of a lack of clarity surrounding digital securities, and presently, industry stakeholders have adopted a “wait and watch” approach.

Promising ventures in the real estate space

Given the benefits of tokenizing securities (particularly the reduced buy-in price and increased liquidity in real estate), it is all but certain that the future will see a larger-scale adoption of digital securities, and it will be better for the industry that it happens when everyone is ready for it.

About the author:

Joe DiPasquale is CEO of BitBull Capital and has unique insights into crypto fund investment styles, diligence, and deals. Previously, he worked in investment management, investment banking, technology, and strategy consulting at Deutsche Bank, Bain, and McKinsey. Joe completed his BA at Harvard University and MBA at Stanford University.

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