Even as President Trump feared China’s bitcoin-prowess, the fact is far from the truth it appears as news breaking from local Chinese mining industry reveals that they are shutting down operations in larger numbers.
Chinese news media reveal that small mining farms which had mushroomed around Chinese river systems to cool their big-heat generating mining machines, are closely down. These players are under tremendous pressure as they can no longer profit from their small-scale operations.
More importantly, the Chinese market is yet to recognize and regulate the cryptocurrency, blockchain product-offerings as financial instruments, affecting these local miners at a critical phase of growth of the bitcoin as a commercial product.
Bear Market cripples miners
For others such as miner Ma, the reason for closing down his mining farm was the long bear market for cryptos. Ma reveals that he sold as many as four of the mining rigs he owned for as less as $125, which was at just one-fourth the price of brand new mining machines.
Fall in prices down local miners
The bear market that has emerged in china for cryptocurrencies has impacted the local miners more than the deep-pocketed overseas players.
Local technology entrepreneurs, the latest two to three years were seen investing “hundreds of thousands” of Yuan for purchasing cryptomining hardware or what are called as “mining rigs.” The highest volume of investments was in the second half of 2017, when bitcoin prices achieved unseen high of nearly $20,000 per coin. The aim of all these ex-bank tellers, accounts and small time businessmen was to make money by mining in bitcoin.
But the crypto dream was not to be for many who arrived late on this mining dream. By middle-to-late of January 2018 bitcoin prices began to slip slowly and steadily before reaching a stable price range of $5,000 to $6,500 by mid-August 2018. However, the damage was already rampant and crypto assets such as Nxt andn Qtum lost as much 99% of their value in no time.
According to one such affected miner, whose last name is Li, says, “By mid-June, my mining business’s profit margin had dropped by 90%. One of my friends who also mines altcoins suffered more, nearly losing all his investment.”
The only way for such local businesses to recover was to shut down and sell-off the mining rigs in the used hardware section of local magazines.
Cheaper, newer Hardware availability
Another major issue, even with selling off their hardware for some of the miners such as Shenzhen business owner is that many small manufacturers are also in the fray, cloning big makers’ products and selling them at a fraction of the cost. Often these small-manufacturer made machines were cheaper than the big-branded, second-market machines, making it nearly impossible for ex-miners to liquidate their assets and recover costs marginally.
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