Price Declines In Last 2 Weeks Pushed 600K Bitcoin Miners Shut Down, Estimates F2Pool Founder

Mao Shixing, the founder of F2pool, estimates that amidst the declining priced and hashrate across the network since Mid-November have pushed bitcoin miners between 600,000 and 800,000 have closed shop. The non-profitability state has led miners to halt all their mining operations.

In an interview with CoinDesk, Shixing explains that his firm makes this estimation by accounting the total network hashrate drop and the average hash power of older mining machines that are having a hard time generating profits. Data from blockchain.info illustrates that bitcoin network’s entire hashrate dropped from 47 million tera hashes per second (TH/s) on Nov. 10 to 41 million on Nov. 24, an approximate 13% decline.

Mao further explains that the miners using older models, such as the Antminer T9+ made by Bitmain and AvalonMiner 741 by Canaan Creative, have most likely the ones who have halted operations. According to F2pool’s miner revenue index, with an average hash power of around 10 TH/s, these miners are probably losing money right now.

In recent weeks, the bitcoin hashrate on F2pool, which now accounts for about 11.4 % of the total network have also observed a decline of over 10. Mao added:

“It’s hard to calculate a precise number of miners connected to us that had unplugged. But we saw over tens of thousands of them [shut down] in the past several days based on conversations we had with larger farms that we are in regular contact with. This is what’s happening among miners in China.”

Mao shared a photo of a man packing computer gear into boxes, on Nov. 20, via his Weibo social media account. He captioned the picture with “shutting down is not an option, now have to sell by the kilos.” The post could easily be implied to mean that mining equipment of recent vintage was sold off by the kilogram in China, but Mao told CoinDesk he was half-kidding when he wrote it, explaining:

“Those miners being sold by the kilos are even older and obsolete models that aren’t usable anymore. So people are selling to recycle [them] like copper instead of for further mining purposes.”

Read more: Giga Watt, Bitcoin Mining Firm Declares Bankruptcy Owing Millions To Creditors

Reason for the Clampdown

Mao asserts that the current condition of miners is the resultant of multiple forces, including the current market crackdown, an increase in electricity costs in China. Another notable factor is that Chinese manufacturers are still racing to upgrade their products, making older machines increasingly uncompetitive.

Mao added:

“All these factors are overlapping right now which led to this recent phenomenon.”

With winter arriving in China, the hydropower plants are experiencing a dry season, which leads to doubled electricity costs as appose to the summer when water is abundantly available. Mao explains that the electricity costs in China’s mountainous Southwestern region, where lots of mining farms reside, could go below 0.2 yuan, or $0.029, per 1 KW/h during summer, but during winters the prices are pushed above 0.3 yuan ($0.043).

Mao added that the tanking of bitcoin’s price to a 13-month low below $4,000, the mining farms with lower productivity, that have been using machines made in 2016 and 2017 could not break even. However, unplugging does not endorse that the mining farms are completely out of the game.

Mao stated that “Bitcoin mining is always a dynamically adjusted process,” implying that as the hashrate drops, so will the mining difficulty. The data from past few days suggests that bitcoin mining difficulty has already declined slightly by 5 %. This dynamically adjusted process could give those who haven’t thrown in the towel an incentive to stick around, Mao said, concluding:

“The change of bitcoin’s mining difficulty normally has a lag of about 14 days [following hashrate change]. After this wave of shutdowns, those players who opted to stay in may have a better life.”

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