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Although it has been more than two months since the halving took place on the Bitcoin network, the cryptocurrency mining industry is still relieved by the frenzied pace of events that have followed suit. The roller coaster of hash rates has caused Bitcoin (BTC) and Ether (ETH) prices to soar, causing mixed feelings among cryptocurrency miners.
The COVID-19 pandemic has also left its mark in the industry, forcing dozens of pools to shut down or shift focus from Bitcoin, with its growing mining difficulty, to less complicated altcoins that are following the cryptocurrency Big Daddy.
The upcoming launch of Ethereum 2.0 is giving food for thought to all miners in their effort to maintain profitability in light of the challenges facing the mining hardware market. After the Bitcoin halving and the onset of the coronavirus pandemic, private miners remained faltering, but large producers were also affected. Will the upcoming Ethereum update aggravate the situation for mining device manufacturers or is it just another milestone that will be easy to adapt to?
Less, but still in business
Bitcoin’s halving led to a serious cleanup in the mining market, with small miners losing all sense of staying, but the near-extinction of private farms was not followed by a significant reduction in large pools.
Alejandro De La Torre, vice president of the Poolin mining pool, said that 15% to 30% of the private miners that produce the Bitcoin hash rate are under enormous pressure to stay afloat. they are gradually closing. Even in the short term, hash rate is expected to drop by up to 20%, with an average daily drop of 6.5%. In total, the hash rate fluctuated after halving from highs of 135 exahashes per second to 98 EH / s, which is a 27% drop. But that didn’t affect interest in cryptocurrency as institutions poured into the derivatives market, with open interest in Bitcoin options up 1,200% in two weeks.
The Chinese factor in the statistical field cannot be ignored: Chinese pools account for up to 65% of all Bitcoin hash rate. The pandemic has had its impact on the local mining industry, forcing more than 40 manufacturing plants to stop deliveries. The delays had a major effect on all miners, as older versions of mining rigs could not be replaced with newer equipment which could have increased the hash rate and offset the halved reward and increased difficulty requirements.
The drop in the price of Bitcoin in May from $ 10,500 to $ 8,100 saw the closure of nearly 2.3 million Antminer S9 mining rigs, clearly reflected in the drop in hash rates from China, where most of the old mining equipment became unprofitable and was sold for scrap.
Not all is bad
Although the rapid spread of the coronavirus pandemic in early 2020 hit supply chains and disrupted the operations of major mining equipment manufacturers, the disruption did not last long, as companies in China and South Korea, headquarters of the major producers quickly resumed deliveries. Bitmain has launched shipments from Malaysia of its chips produced in Taiwan and Korea, while Whatsminer has launched a new model to compensate for lost time and profits.
After resuming operations in February, also Canaan, based in Hangzhou announced the launch of AvalonMiner 1066 Pro, its latest chip model that boasts a computing power of 55 terahashs per second.
Powerry, a cryptocurrency mining operator with 100 megawatts of capacity, has announced the expansion of its capabilities by placing a $ 20 million order for new mining hardware. The equipment will be supplied by Bitmain and MicroBt, while the farm’s power will be delivered to Genesis Mining HEXA’s corporate crypto-mining-farm software.
It is therefore possible to conclude that even the expanding effects of the pandemic on the world will not have a significant impact on the mining software producers, who will be under pressure to provide more new mining platforms to miners looking to keep up with the needs of the sector. . . The most that can be expected in the event of a second wave of pandemic are delays in deliveries and rising equipment prices, which manufacturers would benefit from.
The pandemic did not affect the operations of China’s largest mines, as any disruption would undermine the hash rate of the Bitcoin network. But even the worst-case scenario of a close across China is not likely to result in major losses, as other miners will seize the opportunity and keep the hash rate constant. A possible drop in the hash rate of major currencies due to the closure of Chinese farms would lead to digital money that would become about twice as easy to mine and the profitability of mining would double.
What about Ether and altcoins?
On the one hand, the volatility of altcoins can play into the hands of miners. As the price of Bitcoin rises, other digital assets follow it even faster, thereby significantly improving the economics of their production.
Experts believe that Bitcoin will remain the most suitable cryptocurrency for long-term mining, despite the halving, because its price is more stable than that of altcoins, which can devalue dramatically. Those still willing to stay in the mining game can opt for safer assets with high liquidity and capitalization, such as Litecoin (LTC) and Dash.
Powerry co-founder Rashit Makhat said:
“As a result of the halving of the Bitcoin block on May 11, 2020, the reward of the block […] was halved. To keep up with the market, miners need to update their equipment fleet promptly. Most popular machines until 2020: S9 has ceased to be profitable for miners in almost all regions, including regions with low energy costs, such as China. “
We are migrating, right?
The price of BTC appears to be of little consolation for many, as Valarhash – which operates some of China’s largest mining pools – has decided to switch to altcoin mining.
Despite the recent 33% increase in Bitcoin’s hash rate, Valarhash reduced its contribution to the network from 4,000 to 200 petahash per second in March. The mining pools of the company Bytepool and 1THash, which at one point made up 9% of Bitcoin’s total hash rate, had their processing power redirected to other coins.
Switching to altcoins could require a significant upgrade of mining farms. Investments in ETH and LTC mining equipment have longer payback periods than BTC mining equipment. Mining ETH and LTC requires higher operating margins and equipment is more expensive. Scrypt-based altcoins such as LTC cannot compete with Bitcoin in terms of profitability and return on investment. Therefore, Ethereum’s imminent proof-of-stake transition is unlikely to usher in a revolution for the industry.
Miners and producers still afloat
Despite the technical setbacks generated by the halving, Bitcoin is likely to remain the cryptocurrency of choice for mining for years to come. The main reason is the relative stability of its price compared to altcoins, which are too volatile to be reliable as a profit-setting asset.
In the long run, miners will become less dependent on events such as halvings. As the coin infrastructure develops, the reward for processing transactions on the network will increase and, over time, may outweigh the reward for finding blocks.
As for manufacturers, they will continue to churn out equipment and offer attractive pricing and upgrades to stay afloat and adapt to the rapidly changing requirements of various networks.
The views, thoughts and opinions expressed herein are solely the author’s and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Sarah Austin heads content at Kava Labs, a DeFi-for-crypto startup company based in Silicon Valley. Sarah is the host of the Decentralized Finance web show. She is an entrepreneur, author, and television personality who previously worked with Forbes, MTV and Bravo, and was marketing manager for Oracle, SAP and HP.
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