China’s rains fail to bring relief some block reward miners had hoped

In years past, the start of the annual rainy season in China was a cause for celebration among block rewards miners. The monsoon period enables power companies to reduce their electricity rates, which takes up a significant portion of the operating cost block reward miners pay to discover a new block. The reduction historically led to the most profitable earnings period China-based teams see throughout the year. 

Many block reward miners migrated their operations to hydropower rich areas and purchased expensive next-generation ASIC miners once older machines were no longer profitable. New digital currency mining facilities opened up expecting an immense demand for hosting services driven by a bull market for BTC as new entrants FOMO in hoping to get rich quick. 

This year, the teams solely interested in garnering a share of the reward subsidy are finding high profits more elusive than ever before because of the increasingly thinner profit margins

Block reward miners face a changing economic reality where mining difficulty has doubled as the blockchain protocols reduced the block reward subsidiary in half. The meteoric rise in digital currency value they foolishly pinned their hopes on has failed to occur. They are now waking up and realizing they’re in trouble.

This new market environment has extended the payback period for block reward miners on their mining hardware investment. If a price breakout doesn’t materialize soon, the new breakeven point on ASIC miners could be years instead of months, leaving some smaller operators struggling to stay afloat. 

In China’s southwestern region, there is a surplus of digital currency mining facilities competing for a dwindling supply of clients. A recent online report stated that the oversupply issue has already shifted the hosting business from a seller’s market to a buyer’s market, with digital currency mining farms offering a 20% electricity discount compared to the prior year. Rumors say that up to 30% of mining facility capacity in Sichuan and Yunnan provinces remains unused. 

Given these and other factors, it’s no wonder why some predict this to be the worst rainy season ever for the block reward mining ecosystem. Looking ahead to the back half of 2020 offers little to no comfort for these teams as the situation only gets harder as time passes without a dramatic increase in BTC’s price momentum. 

There is no demand for BTC. The mainstream audience’s interest peaked in 2017 when many FOMO’d into the ecosystem only to get burned during the price value crash then abruptly exit. The wild swings in value are not likely to end since the only widely embraced use case for BTC is price speculation.

New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.