Bitcoin Mining Pool Estimates Up To 800,000 Miners Recently Taken Offline Due To Price And Winter
The third largest Bitcoin (BTC) mining pool, F2pool estimate that between 600,000 and 800,000 miners have shut down their operations in the second half of November as the price of Bitcoin dropped below $4,000.
The estimate is said to be made in accordance with the overall pool’s hash rate drop, but also considering that some operations may be running older versions of ASIC miners, like Antminer T9+ or AvalonMiner 741, which can’t compete with newer, more powerful machines.
F2pool, which holds approximately 11.4% of the total Bitcoin (BTC) mining hash rate, reports that on November 10th, the overall hash rate on their platform was 47 million TH/s. On November 24th, the has rate had dropped to 41 million, which presents a 13% decline.
Hash rate drops in China as the winter comes
The founder of the mining pool, Mao Shixing, explained how tens of thousands of miners confirmed the discontinuance of their operations in China as they began operating below cost.
Shixing went on to point out that it isn’t only about the obsolete equipment those miners are trying to do the job with, but also about the specific winter conditions in the country.
In China, during the summer months, all water-powered electrical plants have energy in abundance, which is not the case during the winter time. In winter, hydropower plants experience a dry season harsh enough to push the prices of the electric energy up by as much as 50%, which makes mining with some older machines profitless.
In addition, Bitcoin has stumbled to a new 14-month low value of around $3,500, deepening the source of problems for Chinese miners.
Some will return
Mao also stated his belief that not all miners who shut down their farms have done so permanently. There is a variety of factors which could make them change their decision:
A decrease in mining difficulty
Bitcoin’s algorithm doesn’t respond immediately to the decrease of the hash rate on the network. It takes time to adjust to new conditions (approximately two weeks). It has already decreased by around 5%, and if this trend continues, it is probable that it will be even lower, making mining more profitable and attracting more players.
Bitcoin’s price rally
If Bitcoin gathers its strength to get out of the recent slump, some mining operations may estimate that it is again profitable to turn on the machines and rejoin the network.
A decrease in the price of electricity
If none of the above happen, there is always the fact that the winter will pass, and those power plants will get enough water to lower the price of their product again, paving way for those miners to take action again.
What about other countries?
This miners’ shutdown didn’t just hit F2pool, but also the whole network, which lost around 10% of its hash power during the last two weeks.
It would also be interesting to hear what is happening with other popular countries for cryptocurrency mining, especially those who charge much more for electricity than China’s reported $0.043 per kWh during the winter.
Just for comparison, the price of electricity in Canada is around $0.12 per kWh, while in the US, it sells for as high as $0.17 per kWh.
Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your own research and/or consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.