Although more than two months have passed since the halving occurred on the Bitcoin network, the crypto-mining industry is still very much at the awful pace of events that have followed. The rollercoaster of hash rates has greatly boosted the prices of Bitcoin (BTC) and Ether (ETH) while provoking mixed feelings among crypto-miners.
The COVID-19 pandemic has also left its mark on the sector, forcing dozens of swimmers to either shift their focus or switch from Bitcoin, with its growing mining problems, to less complex altcoins that the Big Daddy of crypto left.
The impressive launch of Ethereum 2.0 is providing food for thought for all miners in their quest to maintain profitability in light of the challenges facing the mining hardware market. After the halving of Bitcoin and the beginning of the coronavirus pandemic, private miners were left in the lurch, but large manufacturers were also affected. Will the upcoming Ethereum upgrade aggravate the situation for mining device manufacturers, or is it just another milestone that will be easily adjusted?
Less, but still in business
The halving of Bitcoin resulted in a serious cleansing in the mining market, in which small miners lost all sense of remnant, 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 swimming pool, explained that 15% to 30% of private miners who produce the hash rate of Bitcoin are under enormous pressure to stay afloat and gradually shut down. A decrease of up to 20% in the hash rate is also expected in the short term, with an average daily decrease of 6.5%. Overall, the hash rate after halving altitudes of 135 emissions per second to 98 EH / s, saw a decrease of 27%. But that had no interest in the cryptocurrency, as institutions died in the derivatives market, with Bitcoin options open interest growing by 1,200% over two weeks.
The Chinese factor in the statistical field can not be ignored – Chinese pools make up 65% of all Bitcoin hash rates. The pandemic has had its impact on local mining, forcing more than 40 production facilities to stop deliveries. The delays have had a major impact on all miners, as older versions of mining rigs could not be replaced with newer equipment that could have increased the hash rate and compensated for the half reward and increased difficulty requirements.
The fall 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, which is clearly reflected in the fall in hash rates from China, where most of the old mining equipment was useless and was sold for screw.
Not everything is bad
Although the rapid spread of the coronavirus pandemic at the beginning of 2020 affected supply chains and halted operations of major mining equipment manufacturers, the disruption did not last long, as companies in China and South Korea – home of the largest manufacturers – deliveries soon returned. Bitmain launched supplies from Malaysia of its chips produced in Taiwan and Korea, while Whatsminer launched a new model to compensate for lost time and profit.
After repaying business in February, Canaan is also Hangzhou announced the launch of AvalonMiner 1066 Pro, its latest chip model with a computing power of 55 terahash per second.
Powerry, a 100-megawatt-capacity cryptocurrency mining operator, 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 farm powering will be handed over to Genesis Mining’s crypto-mining farm software company HEXA.
It is therefore possible to conclude that even the expansion of the effects of the pandemic on the world will not have a significant impact on the manufacturers of mining software, which will be under pressure to supply more new mining rigs to miners trying to keep up with the demands of the sector. The most that can be expected in case of a second wave of the pandemic are delays in delivery and increased equipment prices, from which the producers would only benefit.
The pandemic has not affected the operations of the largest Chinese mining farms, as any disruption has undermined the hash rate of the Bitcoin network. But even the worst case of a shutdown in China is not likely to result in serious losses, as other miners will take the chance and keep the hash rate stable. A possible drop in the hash rate of major currencies due to the closure of Chinese farms would lead to digital money being mined about twice as easily, 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. With the rise in the price of Bitcoin, other digital assets are stepping up even faster, so the economy of their production is significantly improving.
Experts believe that Bitcoin will remain the most suitable cryptocurrency for mining in the long run, despite halving, because the price is more stable than that of altcoins, which can sharply devalue. Those who are still willing to stay in the mining game may opt for safer assets with high liquidity and capitalization, such as Litecoin (LTC) and Dash.
Rashit Makhat, co-founder of Powerry, explained:
“As a result of the halving of the Bitcoin block that took place on May 11, 2020, the block rewarded […] was halved. To stay ahead of the market, miners need to update their equipment fleet immediately. The most popular machines by 2020 – S9 stopped being unprofitable for miners from almost any region, including low-energy regions such as China. ”
Migrate, are we?
The price of BTC seems a bit comforting to many, as Valarhash – which serves some of China’s largest mining pools – decided to switch to altcoin mining.
Despite the recent rise of 33% in the hash rate of Bitcoin, Valarhash’s contribution to the network fell from 4,000 to 200 petahashes per second in March. The mining pools of the company Bytepool and 1THash, which at one point had 9% of the total Bitcoin hash rate, have diverted their processing power to other currencies.
The transition to altcoins may require a major upgrade of mining companies. Investments in mining equipment ETH and LTC have longer payback times compared to BTC mining equipment. Mining ETH and LTC requires higher operating margins, and the equipment is more expensive. Script-based altcoins like LTC cannot compete with Bitcoin in terms of profitability and return on investment. As such, the forthcoming transition from Ethereum to proof-of-stake is unlikely to bring about a revolution for the sector.
Miners and manufacturers are still flying
Despite the technical disadvantages posed by the halving, Bitcoin is likely to remain the cryptocurrency of choice for mining in the coming years. The main reason is the relative stability of their price compared to altcoins, which are far too volatile to be reliable as a profit-making asset.
In the long run, miners will become less dependent on events such as halves. With the development of the currency infrastructure, the reward for processing transactions on the network will increase and over time the reward for finding blocks will be greater.
As for the manufacturers, they will keep equipment running and offer both attractive prices and upgrades to stay afloat and adapt to the rapidly changing requirements of various networks.
The views, opinions and opinions expressed herein are those of the author only and do not reflect or represent the views and opinions of Cointelegraph.
Sarah Austin is head of content for Kava Labs, a DeFi-for-crypto startup company based in Silicon Valley. Sarah is the host of the web show Decentralized Finance. She is an entrepreneur, author and TV personality who has previously worked with Forbes, MTV and Bravo, and was marketing manager for Oracle, SAP and HP.
