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

Billionaire Tim Draper: Bitcoin Is 'the Currency of the Future'

  • Tim Draper, a billionaire venture capital investor, has recommend taking a long-term approach to investing in Bitcoin (BTC).
  • The Harvard business school graduate believes Bitcoin is the "currency of the future" and that the value of the USD (and other fiat currencies) will gradually depreciate - as people lose interest and confidence in them.

Billionaire venture capitalist Tim Draper recently made a rare appearance on a Facebook live Q&A session during which he shared his views and insights regarding current traditional financial markets and also offered some suggestions on how to sensibly invest in cryptocurrencies.

Draper, an electrical engineering graduate from Stanford University, is well-known for purchasing 29,656 bitcoins (BTC) in 2014, for $18 million. from the US Marshall Service auctions. Notably, 144,336 bitcoins (in total) had been seized at that time after the US Federal Bureau of Investigation (FBI) took down online black market Silk Road.

Bitcoin Will Create "Much More Fluid Markets"

In his recently conducted Facebook live session, the legendary investor and business tycoon seemed to express more confidence in Bitcoin’s long-term performance than on the world’s most dominant currency, the USD. He remarked:

What it is (Bitcoin) is the future of currency and the currency is going to [remain] decentralized and open and you’re going to end up with a much more fluid, dynamic currency if you own Bitcoin, than if you own [US] dollars.

In mid-September 2018, Draper compared the growth and adoption of the internet to that of the current development of cryptocurrencies and blockchain technology. The Harvard business school graduate argued at the time that the combined market capitalization of the digital asset market would surge to around $80 trillion within the next 15 years.

Bitcoin Will Surge To $250,000 By 2022

This, as fiat currencies would gradually begin to lose their value and become practically worthless, Draper forecasted. Moreover, Draper believes bitcoin's price will skyrocket to $250,000 by 2022. In his most recent comments regarding Bitcoin’s potential, Draper noted that: “I never make bitcoin predictions in the short term because short term anything can happen.”

He added:

It (Bitcoin) will move up and down and if you’re investing in the short term you’re making a mistake. People can manipulate the price, it moves up, moves down depending on big customers coming in to buy or big owners coming in to sell.

Psychology of Investing

Going on to describe the psychology of the investing process, Draper remarked:

Sometimes Bitcoin is going to feel very valuable … and sometimes you’re going to feel like dollars are what you really want to hold on to. When you feel like dollars are what you really want to hold on to, you probably want to buy Bitcoin.

Draper, who’s notably the founder of Draper Associates, a Menlo Park, California-based, seed-stage VC firm founded in 1985, further explained that having a long-term investment strategy and approach towards Bitcoin could potentially yield a significant return-on-investment (ROI).