Although more than two months have passed since the Bitcoin network was halved, the crypto industry is still experiencing a frantic pace of events that followed suit. Hash rate hills have left Bitcoin (BTC) and Air (ETH) prices are rising, provoking mixed feelings among cryptographic miners.
The COVID-19 pandemic has left its mark on the industry as well, forcing dozens of pools to either shut down or shift accents from Bitcoin, with its increasing difficulty of mining, to less complex altokines that follow the Big Daddy of cryptographic currency.
The imminent launch of Etherium 2.0 provides food for thought for all miners in their quest to maintain profitability in light of the challenges facing the mining hardware market. After the bitcoin was halved and the coronavirus pandemic began, private miners were left in shock but large producers were also affected. Will the upcoming Ethereum update aggravate the situation for manufacturers of mining equipment or is it just another milestone to which it will be easy to adapt?
Less so, but still in business.
The halving of the Bitcoins resulted in a serious clean-up in the mining market, where small miners lost all their livelihood but the near total disappearance of private farms was not accompanied by a significant reduction in large pools.
Alejandro De La Torre, vice president of the Poolin Mining Pool, said that between 15% and 30% of private miners producing Bitcoins hashrets are under enormous pressure to stay afloat and are gradually closing down. In the short term, the hash rate is also expected to decline to 20% with an average daily decline of 6.5%. In general, the hash rate swung after halving from a maximum of 135 exachs per second to 98 EH / s, or 27% decline. However, it didn’t affect interest in the crypt currency, as institutions flooded the derivatives market and open interest in bitcoin options increased by 1200% in two weeks.
The Chinese factor cannot be ignored in the statistical sphere – Chinese pools make up to 65% of the total bitcoin hash rate. The pandemic had an impact on local mining industry, forcing more than 40 manufacturing enterprises to stop supplying. Delays have had a serious impact on all the miners, as older versions of the miners could not be replaced by newer equipment that could increase hashing speed and compensate for the halved compensation and increased complexity requirements.
The fall in the price of bitcoin in May from $10,500 to $8,100 caused the shutdown of almost 2.3 million Antminer S9 mining machines, which is clearly reflected in the fall in the hash rate in China, where most of the old mining equipment became unprofitable and sold for scrap.
It’s not all bad.
Although the rapid spread of the coronavirus pandemic in early 2020 affected the supply chain and shut down major mining equipment manufacturers, the disruption did not last long as companies in China and South Korea, home to the largest manufacturers, quickly resumed shipments. Bitmain began shipments from Malaysia of its chips manufactured in Taiwan and Korea, while Whatsminer rushed to the market with a new model to compensate for lost time and profits.
After recommencing operations in February, Canaan of Hangzhou also announced the launch of the AvalonMiner 1066 Pro, its latest chip model with a processing power of 55 terabytes per second.
Powerry, a 100-megawatt crypto mining operator, announced it had expanded its capabilities by placing a $20 million order for new mining equipment. The equipment will be provided by Bitmain and MicroBt, and the farm will be powered by HEXA corporate crypto mining software Genesis Mining.
Thus, it can be concluded that even the increased impact of the pandemic on the world will not have a significant impact on manufacturers of mining software, which will be forced to supply more new equipment for mining to the miners who want to keep up with the industry. In the second wave of the pandemic, the maximum that can be expected is delays in delivery and increases in equipment prices, from which manufacturers will benefit.
The pandemic has not affected China’s largest mining farms, as any disruption could undermine the hash speed of the Bitcoin network. But even the worst-case scenario of a shutdown across China is unlikely to result in serious losses, as other miners will seize the opportunity and keep the hash rate stable. A possible drop in the hash rate of major currencies due to Chinese farm closures would make digital money about twice as easy to extract and would double the profitability of mining.
What about the ether and altokoyans?
On the one hand, the volatility of altocoins can play into the hands of miners. As bitcoin prices go up, other digital assets go even faster, which significantly improves the economy of their production.
Experts believe that Bitcoin will remain the most suitable cryptographic currency for mining in the long term, despite being cut in half, because its price is more stable than that of altokuins, which may depreciate sharply. Those who still want to stay in the game may choose safer assets with higher liquidity and capitalization, such as Litecoin ( LTC ) and Dash .
Rashit Mahat, co-founder of Powerry, said:
“As a result of the Bitcoin block cut in half on May 11, 2020, the reward for the block […] was halved. In order to stay ahead of the market, the miners must update their equipment fleet in a timely manner. The most popular machines until 2020 – the S9 has ceased to be profitable for miners from almost any region, including regions with low energy costs such as China.
Are we migrating?
The BTC price doesn’t seem to comfort many, as Valarhash, which operates some of China’s largest mining pools, has decided to switch to altokoin mining.
Despite the recent 33% increase in bitcoin hashing speed, in March Valarhash reduced its contribution to the network from 4,000 to 200 Petahees per second. Bytepool and 1THash’s minting pools, which at one point accounted for 9% of the total bitcoin hashing speed, had their processing power redirected to other coins.
Switching to altocoins may require a significant upgrade of the mining farms. Investments in ETH and LTC mining equipment have a longer payback period than BTC mining equipment. ETH and LTC mining requires a higher operating margin and the equipment is more expensive. Scrypt-based altcoins such as LTC cannot compete with bitcoins in terms of profitability and return on investment. Thus, Ethereum’s forthcoming move to proof of ownership is unlikely to revolutionize the industry.
Miners and manufacturers are still floating.
Despite the technical setbacks caused by the cut in half, Bitcoin is likely to remain the preferred cryptographic currency for mining for many years to come. The main reason is the relative stability of its price compared to altocoins, which are too volatile to be reliable as profit-making assets.
In the long term, the miners will become less dependent on events such as halving. As the coin infrastructure develops, the reward for processing transactions on the network will increase and over time may exceed the reward for detecting blocks.
As for manufacturers, they will continue to produce equipment and offer attractive prices and upgrades to stay afloat and adapt to the rapidly changing requirements of different networks.