Crypto mining supply in Q2 fails to meet market demand, research finds

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After taking a huge hit in 2018, cryptocurrency mining has bounced back and the industry is now booming, a report by Token Insight has indicated. The San Francisco-based token ratings and research firm revealed that during the second quarter of 2019, the supply of mining machines failed to meet market demand. However, the supply of cloud mining products increased, giving smaller miners the opportunity to compete against the established firms.

According to the report, manufacturers of mining equipment have struggled with demand during the first half of the year. Thus, mining equipment purchased by miners in the first half of the year will be delivered in the third and fourth quarters. Most manufacturers are currently selling their miners as future deliverables, expected to be delivered in October and November.

The second half of the year will also see the introduction of equipment with higher computing power. These factors are expected to lead to an increase in computing power, increasing the mining difficulty.

The report also analyzed the mining hardware available in the market, with Innosilicon’s T3-43T Bitcoin miner emerging as the most effective over the quarter. The miner had the shortest payback cycle at 150 days, way ahead of Ebang Ebit E11++ and Antminer S17 whose cycles stood at 203 and 226 days, respectively.

Driven by the rise in demand, the price of mining hardware shot up several times in the second quarter. However, the overall payback cycles of mining hardware were shortened in Q2 due to the rise in crypto prices.

The report also sounded an alarm in regards to the expected increase in computing power and the consequent increase in mining difficulty.

When the computing power increases by 4% on average, nearly half of the mainstream mining machines cannot realize the payback from investment; when the computing power increases by 5%, most mining machines cannot realize the payback from investment.

While the manufacturers have been working on more efficient mining machines, the lengthy waiting period could end up pushing some miners out of business before the end of the year.

The report also indicated that cloud mining was becoming quite popular, with BitDeer and VeryHash being the two leading players in the industry. Cloud mining companies take care of such details as mining hardware purchase, power supply, logistics, field selection and hardware maintenance, allowing miners to engage in mining passively.

According to the researchers, cloud mining has an advantage over purchasing crypto in an exchange. “Because cloud computing power contracts are standardized products, their price is relatively stable. The contract product price will not be adjusted quickly as the coin price fluctuates. This creates a low-risk arbitrage opportunity,” the report stated.