The regulatory environment surrounding Bitcoin is becoming increasingly stringent. In recent times, "mining" has entered a high-risk phase, with small-scale miners considering selling their equipment as the risks continue to rise. The dream of making wealth through mining remains unfulfilled for many, and the reality has shattered their hopes. Reports indicate that some miners have already begun planning to move overseas.
"We will still choose to go abroad, but we haven't decided on the specific country or region yet," said Xiao Jiu, a senior miner under a pseudonym. "This has become a trend. Even larger domestic mining operations are beginning to consider this option."
In early January 2018, the Internet Financial Risk Special Rectification Leading Group issued a notice to address illegal mining activities. There was even a rumor circulating in the market that the central bank had held a closed-door meeting to shut down Bitcoin mines temporarily. Although this was later confirmed to be false, it already caused unease among practitioners.
According to media reports, at the Davos Forum on January 23, Fang Xinghai, vice chairman of the China Securities Regulatory Commission, stated that China would intensify its control over Bitcoin.
[Image: Bitcoin mines began to “go to the sea†plan to increase the risk of small miners selling miners]
What impact will these regulatory changes have on Bitcoin miners? What are their future plans?
Analysts suggest that the industry may see a shift. Smaller miners may gradually disappear, while larger players consolidate their positions. Some miners have already started the “going out to sea†strategy.
Small miners face increasing risks when selling their equipment. "Forget it, don’t dream," one miner said, expressing his frustration.
On January 20, after much consideration, Lao Wu finally decided to sell two of his mining machines. "No one knows what policies will be implemented next. Big miners aren't worried, but for us, self-employed miners, it's hard to keep digging. The risks are growing every day," he said helplessly.
In November 2017, as Bitcoin prices surged in the domestic market, more people joined the mining wave. Lao Wu was one of them. He had been involved in Bitcoin since 2014, initially buying coins from the market. However, the rising price and the rush into mining made him unable to resist the temptation. In mid-November 2017, he spent $40,000 on two mining machines and started mining.
At that time, he regularly shared mining experiences and market prices with other miners in online groups. "There were thousands of messages in the 500-person group every day. Everyone was chasing their own Bitcoin dream," he recalled.
To his surprise, three months later, in January 2018, a message left his dreams unfinished, and his aspirations were shattered.
According to reports, on January 2, the Internet Financial Risk Special Rectification Leading Group issued a document requiring local authorities to guide enterprises to withdraw from mining in an orderly manner and report progress regularly. In addition, the Ordos City Internet Financial Risk Special Rectification Leading Group issued a notice about guiding the orderly withdrawal of virtual mining companies.
Although these measures primarily targeted large-scale miners, they also sent alarm bells to smaller operators like Lao Wu. "Now, self-employed miners are not meaningful anymore," he said.
Lao Wu found that mining was not as easy as he had thought. His two machines ran 24/7, but he hadn't managed to mine a single Bitcoin. After calculating, he found that the electricity cost alone was around 16.8 yuan per day, and the total cost to mine a single Bitcoin was approximately 9,367 yuan.
"The electricity bill accounts for 70% of the costs, and the remaining 30% comes from machine depreciation and labor," he explained. According to his calculations, the total cost to mine a Bitcoin was about 13,000 yuan.
Despite this, according to Coinbase’s quote on January 24, each Bitcoin was still valued above 70,000 yuan. Bloomberg New Energy Finance reported that miners could still profit even if Bitcoin dropped to $6,025.
"The mining business still has a huge profit margin, but small miners may gradually exit the market," Lao Wu said.
During the investigation, reporters found that many small miners tend to sell their mined coins immediately. However, due to price fluctuations and the long time required to mine, they are also vulnerable to policy changes.
As the demand for new mining machines increases, the second-hand market for mining equipment is booming. On platforms like Caiyun Bit, many sellers are offering used S7 mining machines. While these machines were once priced between 5,000 and 8,000 yuan, some buyers now offer as low as 2,000 yuan.
Industry insiders noted that the core factor in determining the quality of mining machines is the chip. Foreign manufacturers have struggled to compete with domestic brands. Ant mining machines remain the most popular and hardest to obtain.
The technical director of Litecoin Cash Technology mentioned that the factory price of the Ant S9 is around 16,000 yuan, but the second-hand price has risen to about 28,000 yuan. Due to high demand, miners often need to pay three months in advance to get a machine at a normal price. To get one immediately, they may have to pay twice the price.
However, the second-hand market is flooded with these machines, with prices ranging from 24,000 to 30,000 yuan.
Many small miners are taking the opportunity to leave the market due to the increased risks, Lao Wu explained.
The emergence of numerous second-hand mining machines has led to a decline in market prices. Many miners are removing graphics cards and motherboards and selling them separately.
In some Bitcoin QQ groups, reporters noticed that besides the sale of mining machines, there were also listings for motherboards and graphics cards. A seller named "Kiki" offered 20 graphics cards at a price below 20% of the market value.
"There are too many second-hand graphics cards and motherboards on the market, and they are basically all mining cards," said a computer hardware seller. "Many small miners are choosing to sell back and forth rather than sell the entire mining machine."
On January 21, when reporters searched for "main board mine" and "graphic card mine" on the second-hand platform "Free Fish," they found many sellers offering mining graphics cards and motherboards.
As the computer business shifted towards selling mining machines, small customers began to disappear, while big clients continued to grow.
Old Z’s phone rang, and an old customer sent a message: “Two more mining machines, or the old configuration.†The so-called old configuration refers to a mining machine equipped with six 1070 graphics cards, priced at 40,000 yuan. Due to its strong computing power, many old customers prefer this setup.
“This customer has bought more than 10 mining machines from me,†Old Z explained. “Normally, small miners don’t buy too many machines at once. They usually start with one or two to test the results before deciding to expand.â€
In March 2017, Old Z, who was engaged in computer hardware sales, noticed that many of his peers had transitioned to selling mining machines. With the skyrocketing price of Bitcoin, more people began purchasing mining machines and engaging in home-based mining. For Old Z, this presented a significant opportunity, as the competition in the computer hardware market was fierce, and profits were thin.
Old Z pointed out that a computer with a mainstream configuration costing 3,000–5,000 yuan only generated a profit of two or three hundred yuan. In contrast, a 20,000-yuan mining machine could generate at least 1,000 yuan in profit.
Soon, Old Z began promoting mining machine sales on WeChat and QQ groups. He set the price of the mining machines he assembled and sold between 20,000 and 40,000 yuan. “Actually, there is no technical difficulty in assembling a mining machine. The biggest factor in determining the mining power is the graphics card,†he said. He used a high-end 1070 graphics card for the 40,000-yuan model.
Computing power refers to the speed of mining, which determines how many Bitcoins can be mined. The higher the computing power, the more Bitcoin can be mined, and the higher the return. “This configuration can reach 270-280 megabytes. According to the current Bitcoin price, after deducting the electricity bill, the daily net profit is about 200 yuan,†Old Z said.
In January 2018, news of the mine closure spread. Old Z noticed that many of his customers had gradually disappeared. Even those who had purchased mining machines tentatively asked if he could recycle them.
Did the market change? Old Z initially considered stopping mining machine sales and returning to the computer hardware business. But he soon realized that there were still many large clients unaffected by the policy and continuing to purchase additional mining machines.
“The impact of the policy on practitioners is certainly there, but it’s not as big as expected. It’s still the size of the mine owner,†Old Z analyzed. “The pressure on small miners with only one or two machines is definitely high; however, those with more than 20 machines are not greatly affected.â€
Old Z explained that larger miners were not affected because they had already recouped their initial investment before the policy was released. On one hand, they kept the currency on the sidelines, and on the other, they were trying to trade in overseas markets.
“The current business hasn’t been greatly affected,†Old Z said. “Many big miners are still making additional purchases recently. Even many people are seizing this opportunity to buy used mining machines at lower prices and continue mining.â€
Some large miners have exited the field and invested back 100 million yuan, earning more than 30 million yuan every month.
Xiao Jiu (a pseudonym), who cashed in in 2013, re-entered the mining business last year.
As a senior domestic miner, Xiao Jiu began participating in the Bitcoin industry in 2009.
“At that time, an ordinary machine could mine more than 10 Bitcoins a day. But the price was very low, and you could buy more than 30 Bitcoins for just one cent,†Xiao Jiu said. This period saw a dramatic increase in Bitcoin prices, with daily gains reaching up to 700%. At that time, Xiao Jiu and his team held 100,000 Bitcoins, and the “accident†earned them their first 10 million yuan.
The real profit came from developing and selling mining machines.
During that time, Xiao Jiu and his team used the first 10 million yuan to invest in chip hardware development. After half a year, in March 2010, they successfully designed a Bitcoin mining machine.
In May 2010, Xiao Jiu’s team began selling mining machines alongside mining. “At that time, each unit cost more than 10,000 yuan, and the price was around 300,000 yuan. Each sales member could make a commission of 100,000 yuan. Sales were crazy,†he recalled.
The massive profit from mining machines allowed the Xiao Jiu team to earn 10 million yuan monthly, with daily profits reaching 300,000 yuan. “At the time, we earned a total of two or three hundred million yuan. Each core member could get two or three million yuan,†he said.
However, the crisis soon arrived.
By the end of 2012, Xiao Jiu decided to develop the second-generation mining machine, but soon discovered that several U.S.-based mining machine R&D teams had entered the market. The efficiency of his own-designed machine was 15 million yuan / 20.
“I decided not to proceed at the time,†Xiao Jiu said.
Desperate, Xiao Jiu returned to the hardware industry in May 2013, cashing out over 30 million yuan.
After leaving the market, Xiao Jiu was involved in the Taiyuan market in 2014, even building an Ethereum mine, but never touched Bitcoin again.
In 2017, a technology friend developed software that could remotely monitor the operation of 5,000 miners simultaneously. Xiao Jiu decided to take a gamble.
In June 2017, he decided to sweep all the graphics cards from a Chinese e-commerce platform. “At the time, I scanned 13,000 graphics cards.†Not only that, but he also scanned 15,000 graphics cards from other channels. Within a 20-day period, he invested nearly 100 million yuan and deployed 4,000 mining machines to build a Bitcoin mine.
Xiao Jiu used all 28,000 graphics cards for mining, but soon realized that the declining number of graphics cards on the market had caused their prices to soar. After a short period of consideration, he decided to sell some of the graphics cards.
“At the time, the pressure of 100 million yuan was too great, so I decided to mine the video card while mining, and quickly return to it.†During that time, the mine brought in 30 million yuan in returns every month. “We initially thought we would take 6 months and 11 days to break even, but the Bitcoin price rose too fast. It took only 2 months and 17 days to successfully return more than 70 million yuan.â€
“Now, miners are divided into three categories,†Xiao Jiu said. “The impact of this policy will inevitably affect the first two categories, but the third category will retreat.â€
He explained that there are three types of miners: small miners holding one or twenty, even two hundred mining machines, simply mining and throwing out what they get. The second level is miners with 500 to 1,000 mining machines, who choose whether to store or sell Bitcoin immediately.
Xiao Jiu told reporters that 2017 was the outbreak of the Bitcoin craze, and May 2017 was the watershed of the industry. Before that, there were few retail investors in the industry, but as Bitcoin prices soared, retail investors gradually increased. More importantly, fund companies from regions such as Singapore and Germany began to intervene, allowing Bitcoin to trade in the futures market.
“The third category is usually miners with thousands or even tens of thousands of mining machines. These miners typically appeared in 2017 and are involved in Bitcoin-derived derivatives and futures. This type of group usually holds coins but generally does not sell them. At the same time, to prevent the price of coins from falling, they often hedge in the capital market to avoid risks and gain greater benefits,†he said.
Bitcoin strengthens regulation? Some Bitcoin mines "go to the sea".
Beginning in October 2017, token prices soared. Bitcoin prices rose more than 13 times during the year, and a Bitcoin exceeded 100,000 yuan. The dream of wealth has flooded countless people. By the end of December, the price of Bitcoin was fine-tuned and gradually adjusted to around 70,000 yuan.
In an interview with reporters, Jiang Zhuoer, leader of the Leipzig pool, believes that the fundamental reason for Bitcoin's rise is the increasing number of users, especially after Japan legalized Bitcoin payments. The tense international political and economic situation has also caused safe-haven funds to flow into Bitcoin.
Jiang Zhuoer said that Bitcoin is suitable for long-term investment. For individual investors, at least 5 years must be guaranteed, and Bitcoin should be stored in their wallet. The biggest risk is that after buying, it is washed out by a certain bit of Bitcoin bear market.
CSDN founder Jiang Tao believes that Bitcoin is the anchor of digital currency. Compared with gold and French currency, Bitcoin is driven by algorithms and the quantity is determined. With the development of the digital currency market, the price will continue to rise, in addition to market expectations pushing up the price of Bitcoin.
But there are also big names who oppose the value of Bitcoin. The best known is Buffett.
Buffett publicly evaluated Bitcoin in December 2017. He described Bitcoin as a “real bubble.†“You can’t give Bitcoin a valuation because it’s not an asset that can create value.†Back in 2014, he called on investors to stay away from Bitcoin. Buffett said that this is a mirage.
Morgan Chase CEO Dimon has said that he will “spread out every minute†of any JP Morgan Chase trader who is trading Bitcoin and gave two reasons: “One is against our rules, and they are stupid.â€
Lawyer Xiao Wei of Dacheng Law Firm believes that the Central Bank, the Ministry of Industry and Information Technology, the China Banking Regulatory Commission, the China Securities Regulatory Commission, and the China Insurance Regulatory Commission issued the Notice on the Prevention of Bitcoin Risk in December 2013. In the notice, the properties of Bitcoin were described: there is no centralized issuer, the total amount is limited, the use is not geographically restricted, and anonymity. In nature, Bitcoin is legally positioned: specific virtual goods.
According to media reports, in recent days, Xinjiang and Inner Mongolia have issued restrictions on increasing the price of Bitcoin mines. Regarding the impact of supervision, Wright's cash technology director, Kuang Keyan, believes that, first of all, according to relevant laws and regulations, currently in China, it is not illegal to hold Bitcoin and Bitcoin mining, and no corresponding laws and regulations are drafted, so miners are not illegal to place mining equipment at the mine.
It can be said that the mine has not received the documents of the mine to increase the price of the mine, but the mine price has actually increased by 30%.
But the attitude of the regulator has already shown tightening of Bitcoin regulation.
In September 2017, the central bank and seven other ministries jointly governed ICO and shut down domestic Bitcoin exchanges, resulting in a short-term sharp decline in Bitcoin prices, and Bitcoin fell 35% in one day.
"If a few months ago, the Bitcoin exchange was not closed, ICO was hit; if more than 80% of the Bitcoin transactions and ICO financing are happening in China, what is it today? I think there will be some fear after thinking about this issue," Pan Gongsheng, deputy governor of the central bank, said in December 2017.
According to media reports, on January 23 this year, Fang Xinghai, vice chairman of the China Securities Regulatory Commission, said at the Davos Forum that China would strengthen control over Bitcoin. He believes that we can see that China's economy is very large. For China, Bitcoin transactions are very important and need to be strengthened because it is now trading very frequently.
Some miners have already started the “going out to sea†plan. According to industry insiders, Quebec, Canada has become a popular choice for miners to go overseas due to cheap electricity and lower temperatures. Xiao Jiu also intends to move overseas, although no specific country or region has yet been determined.
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