With mining hardware production in China heavily affected by the COVID-19 outbreak and with the impending Bitcoin halving, a “cull” of small-time miners might be the coronavirus’ biggest impact on the Bitcoin network.
Coronavirus Could Cull Many Solo Miners
The coronavirus outbreak caught everybody out, and it couldn’t have come at a worse time for the smaller miners, because they’ll be the last to get hold of the newly updated mining gear.
With the Bitcoin halving just weeks away, and Bitmain’s release of its new Antminer S19 Pro, which is believed to be able to process between 95-110 TH/s, it’s imperative that miners update their mining rigs if they want to remain competitive.
However, with the coronavirus shutdown in China, many businesses drove to a halt. Mining manufacturing businesses in China were no different. Mining giants Bitmain and MicroBT were hit with the shutdown, too, as they were unable to ship new equipment to mining farms.
The Bitcoin Halving is Creating a Mad Stampede for Updated Mining Equipment
As the updated mining equipment begins to be shipped, the race to get hold of it before the halving will be intense.
The Bitcoin Halving is set to take place in May, and after it does the Bitcoin block reward will be cut in half to just 6.25. This means the cost of generating a Bitcoin will jump to between $12-$15,000 depending on the cost of electricity, and with the fewer BTC on offer the competition will get much fiercer.
At today’s prices, however, miners will be hit with a drastic loss and many won’t be able to ride the loss in the revenue. What’s more, the need for the newer mining equipment will be necessary, so miners are scrambling to get their hands on the likes of the new S19 Pros and other updated equipment.
Related Reading: Bitcoin Miners Need to Prepare for The Bitcoin Halvening
The Price of Bitcoin After the Halving Could Drive Miners Away
As things slowly return to normality again, and updated mining equipment begins to be shipped out, there could be another, bigger problem for miners across the globe.
In China they call it 矿难 “mining catastrophe” and many smaller miners are fearing it. And it won’t just affect Chinese miners either, as most mining hardware around the globe stems from China.
The worry is that if the BTC price drops or even remains at these prices, mining will become less profitable, especially after the halving.
Of course the BTC price affects all mining companies no matter how large they are but the bigger firms can play the long-term game, so they can take a short term hit.
With things slowly opening up again in China, manufacturing is slowly getting underway and some shipments are being made, but the bigger firms are getting the earliest batches.
What’s more, the likes of Bitmain, which manufactures and mines, will be looking after itself first. So, once the Antminer S19 Pros start mining, they will drive up the Bitcoin hahsrate, which will make it more energy-consuming for those using the older mining rigs.
It’s hard to see how the little guy will be able to compete after the halving, unless the price rises significantly. If they have a long-term vision and can see out a negative return for a while, they will be fine. But the problem is that most miners have to sell most of their block reward to pay costs.
The big firms will be fine, but as always it’s the man on the street that will lose out. They can’t negotiate electricity prices like huge mining farms. With Bitmain well set to start churning out its more powerful hashpower, their customers, especially the smaller ones will be fewer than ever.
Author: Tommy Limpitlaw