May 29, 2020 / Beginners

Miner Capitulation: Will All Mining Farms Be Closed?


On May 11, Bitcoin survived its third halving. To date, the block reward is 6.25 BTC. The decrease in the reward affected the total income from mining the first cryptocurrency.

Aftermath Of Halving

After reducing the reward, the question arises: what hardware is better to use for mining. As The Block’s research shows, the two most profitable ASICs are Whatsminer M30S ++ manufactured by MicroBT and Antminer S19 Pro from Bitmain:

profitable mining

Note, this assessment was carried out at a Bitcoin price at $ 9,700, and now the profitability of both hardware has decreased markedly. But they are the best that the industry can offer today.

It is expected that after Bitcoin halving we encountered certain issues in the network. Today many of them are still not resolved. On May 17, a kind of anti-record was set. On that day, miners mined a total of 95 blocks, instead of 144.

It is not surprising that with such performance in the blockchain congestions formed. The current capacity of the mempool is still high.

Miners try to manipulate the decrease in complexity and immediately increase the hashrate, but in fact, the situation does not change much. Therefore, the number of confirmed transactions per day goes down.

Thus, the Bitcoin network cannot fully recover from the consequences of halving. The reason may be that miners refuse to leave the market. After all, they could be disconnected for a long time, give difficulties to significantly decrease, and then work at a convenient level.

Therefore, if we look at the complexity of the network over the past 30 days, then it seems to have decreased and noticeably. But the same chart over the past year shows the complexity of the network did not fall.

The hash rate is similar. The rate fell from a peak of 136 EH / s immediately before halving. But in annual terms, the Bitcoin network has significantly increased. This is not what it should have been after halving the block reward by half.

It turns out that the miners are working hard, and in the news, they say that they are surrendering.

Miners Capitulation

There was no significant redistribution in the power of the network between large players after the halving.

China remains a clear leader in Bitcoin mining on an industrial scale and three local mining pools F2Pool, AntPool, and hold more than 50% of the hashrate. Their performance has not yet fallen, even though one of the main Chinese mining provinces of Sichuan demanded to temporarily stop mining farms:

mining pool

According to the media, miners choose this region because of cheap hydroelectric power. But now the province has a drought and therefore electricity charges have risen. It can be assumed that instead of stop operations, miners temporarily agreed to pay more for electricity, and therefore the hash rate did not drop. But why do they make such sacrifices?

Perhaps the miners suffer huge losses and are forced to sell more cryptocurrencies than they mine:

And the fact that they are forced to sell is confirmed by the chart of Bitcoin difficulty:

btc difficulty

When miners dump the price, it can be a good opportunity to buy? After the price goes down under the pressure of sales, weak miners will leave the market, and those who remain will receive comfortable working conditions. That is, they will mine much more BTC than they need to service mining farms. Thus, a shortage of new Bitcoins will appear on the market, and demand will push the price up.

What else can force miners to sell bitcoins other than electricity charges? It could be a competition. Large miners can specifically dump bitcoin to re-divide the market after halving, taking even more hashrate.

Stop Operation

So, the one to whom mining is not profitable simply turns off the power. This allows the remaining participants to increase their profits.

But as you can see, the third Bitcoin halving could not fend off the interest in the first cryptocurrency from large industrial miners. But what will happen next? After all, every time the reward for the block will become less and less.

Could it be that all the major miners exit the game? It is quite possible, not tomorrow of course, but after eight or twelve years completely. And this does not mean that bitcoin will be worth a penny, at that time prices of $ 100,000 or $ 200,000 per BTC may well be very small. Just the reward for the block will be too small to make sense to mine on an industrial scale.

And, perhaps, it will even be a good thing, because then almost every BTC user will be able to run a couple of ASICs will appear and it will help maintain the network.


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