Cheaper Electricity Expectation May Help Crypto Mining Industry Recover
The last year has been fairly unprofitable for bitcoin miners throughout the world, granted the sharp decline in price, following BTC’s $20,000 all-time high. During the crypto winter, numerous mining companies were forced to halt operations, and sell their mining rigs for low prices.
This was also the case in China, where numerous mining farms were set up while digital currency prices were booming. Luckily, weather predictions indicate that the provinces of Yunnan and Sichuan will get higher amounts of rainfall this summer, thus helping power plants generate a considerably amount of excess electricity.
Whenever the amount of available electricity exceeds the market demand, prices tend to drop in order to encourage more consumption. According to miners in China, this is a great opportunity to restart their businesses, since cheaper electricity can make a big difference in mining profitability. To put things better into perspective, apart from the initial investment in hardware equipment, electricity is the only other cost that miners have to deal with. High electricity prices have a negative impact on the profitability associated with cryptocurrency mining activities, granted the large power consumption of mining hardware.
Thanks to the weather predictions, the mining community in China is preparing to restart their operations. In preparation, miners are buying more hardware, and signing contracts with individuals and companies who wish to leverage their own mining rigs. A market study has shown that mining farms are preparing thousands of mining rigs, whereas some individual miners have purchased hundreds of rigs.
It is worth pointing out that this time, miners are a bit more careful. With this in mind, they are shifting their attention towards second hand mining rigs, which can offer significant cost savings. While second hand rigs are perfectly capable of solving the bitcoin proof-of-work problem, their efficiency is a tad lower when compared to newly-manufactured rigs. The decision to purchase used rigs showcases that the mining community isn’t 100% sure of mining profitability on a long-term basis. Additionally, future crypto price uncertainty is adding an extra element of risk.
In a press statement, a mining farm representative mentioned: “This industry is always about making a bet after all. There are always risks from multiple aspects, especially from the markets side in this bearish time.”
Cryptocurrency mining is still a lucrative business throughout the world, especially for big operators. On the other hand, numerous individual investors were forced to abandon operations, due to market uncertainty. Hopefully, as we leave the crypto winter, prices and mining profitability will return to previous, more positive rates.