Fengshui Research Report: Mining is just a financial management product for small miners
“Small miners like me only need to pay the money, pay the electricity bill, and wait to split the money. Even big customers will do this in the future.” Miner Mr. Huang said this in an interview with Bibi News.
For some small miners, in this market, mining as a side job is an easier choice.
Sichuan, where policy actions are frequent
Several research reports have pointed out that Chinese miners control more than 65% of the world's Bitcoin computing power, so events such as Bitcoin prices, electricity prices, policies, and halving have profoundly affected domestic miners.
From last year to this year, in Sichuan, where more than 50% of the country's Bitcoin computing power is concentrated, mining-related policies have continued to resonate:
-In December 2019, Ganzi, Sichuan urgently introduced a work plan to clean up and rectify Bitcoin mines to urge power generation companies to prioritize standardized indicators and social electricity supply during the dry water period.
-From April to May 2020, Sichuan announced the first batch of “hydropower consumption demonstration enterprises”, which include multiple mines. This is a rare local government policy to clearly support mining during the flood season in 18 years.
-In May 2020, the Sichuan Finance Office issued a notice requiring enterprises to withdraw from virtual currency mining to all counties and cities to avoid risks such as investment speculation, illegal fund-raising, and pyramid scheme fraud related to “mining.”
-In June 2020, the power systems in the two provinces of Sichuan and Yunnan emphasized the protection of compliant mines and cracked down on direct power supply mines.
It's no exaggeration to say that mining policies change day by day, and every change in policy stirs miners' nerves. Uncertainty about mining policies is fatal to every decision made by miners and mines, including whether to choose to turn off the mining machine or keep the mining machine running, whether to migrate with the mining rig or mine in situ.
However, the mining policy issue is clearly a protracted battle. Mr. Huang revealed to Bibi News that according to a document, the country will pay more and more attention to this issue and continue to introduce relevant policies to supervise the mining industry.
Uncertainty during the flood season
After all, mining is an activity that depends on the weather. Policy uncertainty is plaguing miners, and even during periods of largely regular abundance, there is great uncertainty.
In 2019, the mining industry experienced a “fake flood season”. Tian Xin, co-founder of Ant Mining Pool, recalled the flood season in 2019 during this year's online event. He mentioned that there was no rain in many parts of Sichuan at the time, and there was no water, so there was no electricity. Later, there was torrential rain. There was too much sediment in the river, causing the equipment to not generate electricity properly, causing the mining machine to shut down continuously.
This weather situation is basically a disaster for the mine. In fact, the delay in abundant water, torrential rain, and geological disasters in 2019 caused huge losses to miners.
A video posted by the Coinprint Mining Pool on Twitter shows that at the time, some Bitcoin mining sites in Sichuan were affected by floods and affected to varying degrees. Local media have reported that Aba Prefecture in Sichuan was hit by torrential rain, and landslides affected 17 counties in the area.
Mr. Huang told Bibi News that according to some estimates, every day the mining machine is shut down, the mining payback cycle may increase by one month.
“Generally, the electricity bill is more than 2 cents, but in the case of mining machine failure, extreme weather, etc., the recovery cycle of the mine will be lengthened. If cheap electricity is missed, the average electricity bill in the mine will rise to more than 4 cents or even 5 cents.”
Retail miners are too difficult
Miners face so much uncertainty in mining, and retail miners are also very helpless in the face of the trend of specialization and scale in the mining industry.
Hu Donghai, another miner interviewed by Bibi News, said that the large-scale mining industry, or even joint mining, will become more mainstream in the future. Among them, cooperative relationships between mining machine investors and mining machine manufacturers may be more common, and for ordinary people, it will be more difficult to enter this market.
“Mining is becoming more specialized and large-scale, making it difficult for retail investors to participate, and there are more and more pits.”
A miner mentioned the thunder he stepped on in an interview with Bibi News. When he hosted the mining machine in Yunnan, he experienced situations where mine owners tried their best to reduce the deduction power.
The mine owner claimed that the mining machine was shut down on the grounds that the mining machine needed maintenance, policies, power supplies, etc., but due to geographical barriers, the miner was unable to know the actual situation at the mine, which caused him some losses.
The miner told Bibi News that now, affected by Bitcoin's halving and rising computing power, they are moving the mining machine to a place where electricity costs are lower, and now they can only shut down again.
Electricity prices are the essential problem
Retail miners definitely can't compete with big miners in terms of mining machine computing power, and even if the mining difficulty is reduced, I'm afraid it won't save retail miners.
According to BTC.com information, the difficulty of Bitcoin mining was lowered from 15.14T to 13.73T on June 4, reaching 9.29%. This is the second largest reduction in difficulty since this year. The last sharp drop occurred after a sharp drop in 3.12, after a large number of miners shut down.
The reduction in the difficulty of Bitcoin mining combined with the advent of the flood season seems to be a good thing for miners, including retail investors, but Mr. Huang's message to Bibi News is that the reality is very cruel, and the reduction in the difficulty of mining in Fengshui is meaningless at all for retail miners.
Mr Wong said that for retail miners, mining is just a wealth management product, a side job, so it may be easier for them. Now the mining industry is becoming more mature, and small mining unions are slowly being eliminated from the market. This is a trend of development from low dimensional to high dimensional.
“Now, large mining pools have monopolized the mining industry, and many new financial products have gradually spawned many new financial products. This is an interlocking development model. The era of putting up a bunch of mining machines in the past is over.” That's what Mr. Wong said.
However, in competition among miners, electricity prices are the most important part. Discussions on the current situation of miners inevitably returned to electricity prices.
Mr. Huang said, “The flood season is actually not an essential issue; the electricity price is the essential issue. Whether it is a mining rig with good performance or a mining rig with poor performance, as long as the electricity price the miner gets is cheap enough, then this miner can survive and grow bigger and bigger.”
Source: Bibi News
