Bitcoin

The halving of Bitcoin and Ethereum 2.0 brings big changes for cryptocurrency miners

Although it has been more than two months since the Bitcoin network halved, the cryptocurrency mining industry is still affected by the hustle and bustle of the events that followed. The roller coaster of hash rates caused Bitcoin (BTC) and Ether (ETH) prices to skyrocket, causing mixed feelings among cryptocurrency miners.

The COVID-19 pandemic has also shaped the industry. Dozens of groups need to shut down their computers or change their focus from Bitcoin with the increasing difficulty of mining to altcoins with less difficulty that are behind the big daddy of cryptocurrencies.

The upcoming launch of Ethereum 2.0 feeds all miners in an effort to maintain profitability given the challenges faced in the mining hardware market. After the Bitcoin halving and the coronavirus pandemic began, private miners wavered. But the big manufacturers were also affected. Will the upcoming Ethereum update make things worse for mining equipment manufacturers, or is it just another milestone to easily adapt to?

Less, but still in business

The halving of Bitcoin and Ethereum 2.0 brings big changes for cryptocurrency miners
The halving of Bitcoin and Ethereum 2.0 brings big changes for cryptocurrency miners

Bitcoin’s halving resulted in a serious cleanup of the mining market. with the little miners who lose all sense of constancy but the near extinction of private farms There was no significant reduction in major mining groups.

Alejandro De La Torre, Vice President of the Mining Group, Poolin stated that between 15% and 30% of the private miners who produce the Bitcoin hash rate are under immense pressure to stay afloat and are gradually pulling out. A Short-term decrease in hash rate by up to 20%, with an average daily decrease of 6.5%. Total, Hash rate dropped after halving from highs of 135 EH / s to 98 EH / s, or a 27% decrease. However, this did not affect interest in cryptocurrency. When the institutions entered the derivatives market, open interest in Bitcoin options rose 1,200% for two weeks.

The Chinese factor in the statistical field cannot be ignored. Chinese groups account for up to 65% of the total Bitcoin hash rate. The pandemic is affecting the local mining industry. more than 40 production sites are forced to stop deliveries. The delays had a significant impact on all miners earlier versions of mining equipment could not have been replaced with newer equipment that could have increased the hash rate and compensated for the reward halving and increased difficulty requirements.

Bitcoin’s price drop from $ 10,500 to $ 8,100 in May caused nearly 2.3 million Antminer S9 mining equipment to be shut down. This was clearly reflected in the drop in hash rates in China. where most of the old mining equipment became unprofitable and was sold for scrap.

Not everything is bad

Although the rapid spread of the coronavirus pandemic in early 2020 affected supply chains and stopped the operation of the major manufacturers of mining equipment, this interruption did not last long, As a company in China and South Korea, where the largest manufacturers are located, deliveries quickly resumed. Bitmain Deliveries of its chips, produced in Taiwan and Korea, from Malaysia while Whatsminer has launched a new model Make up for lost time and profits.

After resuming business in February Also Kanaan from Hangzhou display the launch of AvalonMiner 1066 Pro, its newest model chip with a Computing power of 55 TH / s.

Powerry, a cryptocurrency mining operator With an output of 100 megawatts, the company announced the expansion of its capacities by placing an order worth USD 20 million for new mining hardware. Equipment is provided by Bitmain and MicroBt, while The energy from the farm is supplied to the cryptocurrency farm business software HEXA from Genesis Mining.

So, It can be concluded that even as the impact of the pandemic spreads to the world, it will not have a material impact on mining software makers. who will be under pressure to deliver Newer mining equipment for miners who want to keep up with industry demands. Most of what to expect in the event of a second wave of the pandemic Delays in delivery and an increase in device prices that only manufacturers can benefit from.

The pandemic has not affected the operations of China’s largest mining operations, as any disruption would have buried the Bitcoin network’s hash rate. But even in the worst case a China-wide shutdown is unlikely to result in serious losses, as other miners will take the opportunity and keep the hash rate stable. A possible drop in the hash rate of major currencies due to the closure of Chinese farms would make digital money about twice as easy to mine and mine profitability doubling.

What about ether and altcoins?

On the one hand, The volatility of altcoins can favor miners. With Bitcoin’s price rising, other digital assets are following even faster. This significantly improves the profitability of its production.

Experts believe that Bitcoin will remain the most suitable cryptocurrency for mining in the long run. despite its recent halving because its price is more stable than that of altcoins, that can be greatly devalued. Those who are still willing to stick with the mining game can opt for itsafer assets with high liquidity and capitalization, like Litecoin (LTC) and Dash.

Rashit Makhat, Powerry Co-Founder stated:

“As a result of the Bitcoin block halving, which took place on May 11, 2020, the reward was given per block […] it was cut in half. To stay ahead in the market, miners need to quickly upgrade their equipment fleet. The S9 was the most popular machine by 2020 and became unprofitable for miners in almost every region, including regions with low energy costs like China. “

Are we migrating?

The price of BTC seems to be little comfort for many, how Valarhash, which operates some of the largest mining basins in China, decided to switch to altcoin mining.

In spite of from the recent 33% increase in Bitcoin’s hash rate Valarhash reduced his contribution to the network 4,000 to 200 PH / s in March. The company’s mining pools Bytepool and 1THash, which at one point made up 9% of Bitcoin’s total hash rate, have redirected their mining power to other currencies.

The transition to altcoins may require a significant upgrade from mining operations. Investing in equipment to mine ETH and LTC have longer payback periods compared to BTC mining equipment. The ETH and LTC mining requires higher operating margins and equipment is more expensive. Scrypt-based altcoins like LTC cannot compete with Bitcoin in terms of profitability and return on investment. Such as, The next transition is unlikely From Ethereum to proof-of-stake heralds a revolution in the industry.

The miners and manufacturers are still afloat

Despite the technical setbacks caused by the halving, Bitcoin is likely to remain the cryptocurrency of choice for mining for years to come. The main reason is the relative stability of its price compared to altcoins, These are too volatile to be reliable as fixed income assets.

In the long run, miners will be less dependent on events like the halving. As currency infrastructure evolves, the reward for processing transactions on the network increases and over time may exceed the reward for mining blocks.

As for the manufacturers, They will continue to produce equipment and offer attractive pricing and upgrades to stay afloat and adapt to the rapidly changing needs of different networks.

The views, thoughts, and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Sarah Austin is Head of Content at Kava Labs, a Silicon Valley-based DeFi cryptocurrency startup. Sarah is the host of the web show Decentralized Finance. She is an entrepreneur, writer, and television personality who has previously worked with Forbes, MTV, and Bravo, and has been a Marketing Manager for Oracle, SAP, and HP.

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