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

Bitcoin Hashrate Reaches All-Time High, As BTC Halving Event Approaches

Bitcoin’s (BTC) hashrate recently reached an all-time high according to data from Blockchain.com, a leading London-based block explorer service.

Bitcoin network’s hashrate, which represents the amount of computing resources being dedicated towards providing security for the cryptocurrency’s blockchain (among other uses), has been climbing steadily in the past few months.

Higher Hashrate Suggests Increased Interest in Mining Bitcoin

Available data from June 19, 2019 shows that Bitcoin’s hashrate currently stands at around 65.19 trillion hashes per second (TH/s). Notably, the BTC blockchain’s hashing power began to increase significantly as the pseudonymous cryptocurrency’s price crossed the $9,000 and then $10,000 mark.

In addition to improving the security of the Bitcoin blockchain, a higher hashrate indicates that the overall interest in mining BTC has surged - presumably due to the recovery made by the bitcoin price and also that of other major cryptoassets.

Hashrate May Be Used to “Hack Humans to Create Gold 2.0”

Commenting on the rising hashrate, Wall Street veteran and Bitcoin bull Max Keiser remarked via Twitter that an increase in hash power results in a considerable price increase for Bitcoin in most cases. Keiser believes that even some of bitcoin’s biggest supporters fail to understand the importance of hashrate.

The experienced financial analyst remarked:

[Hashrate can be thought of as] Satoshi’s ability to hack humans to create Gold 2.0.

Previous BTC Hashrate All-Time High of 60 TH/s Set in September 2018

Bitcoin’s recently recorded hashrate of over 65 TH/s is considerably greater than the previous all-time high of about 60 TH/s - which was achieved in September 2018. After reaching a new high last year, bitcoin’s hashrate had been declining steadily - as the cryptocurrency’s price also continued to plummet.

But after bitcoin’s value reached a low of around $3,150 in December 2018, the leading cryptocurrency’s price and also that of other major cryptoassets began to recover in 2019. Other key metrics used to assess the performance of the Bitcoin network have also shown marked improvement.

Less Than 16% of 21 Million Bitcoins Left to Be Mined

According to BitcoinBlockHalf data, there are only 3,220,350 bitcoins left to be mined as the Bitcoin protocol has algorithmically capped the maximum supply of BTC at 21 million. 

At present, there should be 17,779,650 bitcoins in circulation but analysts have estimated that nearly 4 million BTC has been lost due to account mismanagement - including users forgetting their private passwords to their crypto wallets.

Moreover, the Bitcoin halving is approaching (on track to take place on May 21, 2020), a critical event which reduces the number of bitcoins that can be digitally printed (from mining) by 50%. Several crypto researchers have noted that this is one of the most significant events in bitcoin’s relatively short history as the reduction in the BTC supply has had a notable impact on the crypto’s price.