Miners pull cords as bitcoin prices fall
Two months ahead of a Bitcoin halving, the cryptocurrency’s prices have rapidly fallen by nearly 50 percent to around $5,000. Bitcoin halving is an event where the miner’s block production rewards are cut in half. Responses are mixed: As the Bitcoin price nears its break-even point of $4,000, some miners are upgrading facilities to state-or-art equipment while some are leaving the business for good. The issue is not confined to Bitcoin. Antminer S9, known as the most optimal hardware for mining etherium, will allegedly stop mining in April due to low profitability. How will crypto miners solve these issues to survive in the market? #What is the cost of mining bitcoin? Bitcoin prices have fallen to the $5,000 level, but luckily this is enough for most miners to make ends meet — that is, under the premise that they are equipped with the latest mining equipment and are located in regions where electricity fees are low. Mining costs include purchasing equipment, maintenance and rent, but the biggest factor of all is electricity fee. In China, which mines 50 to 70 percent of all bitcoin circulated worldwide, the mining cost is around $3,172 per bitcoin. This figure falls during the rainy season when hydroelectric power generators reach full operation and pull down electricity costs in the country with high supply. In the United States, the cost is above $4,000. #Miners at a crossroad: Shut down or upgrade? Earlier this year, the number of large-sized bitcoin miners fell to one third compared to 2017--prompted by an increased hash rate, halving events and falling bitcoin prices. But at the moment, moderate electricity fees are keeping the industry afloat. However, smaller sized miners that fail to pay the costs for everything other than power are heading to countries where electricity fees are even lower, such as the Middle East or the Commonwealth of Independent States. A massive price decline on March 13 was another major factor. That same day, Chinese mining pool F2pool noted the difficulty level for bitcoin mining was changing, an indicator that miners had started shutting down equipment. #Miners going out of business — Can it affect prices? Miners don’t keep bitcoin inside their pockets for long after mining. Mined cryptocurrency are transferred to exchanges approximately two months later. This sell-off period is not much relevant to bitcoin prices either. From the miner’s perspective, they have to purchase state-of-art facilities, pay regular expenses like electricity fees and rent—in other words, they have no choice but to constantly sell their produce. This explains why bitcoin prices fall between October and April, right after China’s rainy seasons fall and miners sell their bitcoin en masse. Bitcoin prices regularly fall in March and April but spring 2020 is expected to be a particularly difficult season for miners. At the moment, it’s unclear who would be smiling in the end — the company that leaves, or the one that sustains in this declining market. My faith is in the positive sprit of old miners who have been around for a long time.