Editor’s note: This article from the blue fox notes (ID:lanhubiji), the author of this article from the BitMEX, Bitmex.com, Odaily by authorized reprint daily planet.
Over the past few weeks, encrypted currency prices fell sharply. This paper analyzes the impact on the prices of mining industry. Since the beginning of November 2018, bitcoin hash rate decreased by about 31%, equivalent to about 1 million 300 thousand bit hash, the rate of S9 machine. We can see that many of the miners are struggling; however, not all of the miners, mining costs are the same, with coins encryption prices, higher cost of miners will first turn off their machines and was eliminated.
Since the beginning of November 2018, bitcoin prices fell by about 45%, while at the same time, the amount of mining bitcoin network decreased by about 31%. According to our estimates, which is equivalent to about 1 million 300 thousand bits, S9 machine is closed. Therefore, since the encryption currency prices, mining industry is facing great pressure.
So far, prices lead to two major bitcoin difficult to adjust, once in November 16th 7.4%, another 15.1% in December 3rd. While the 7.4% adjustment is the biggest adjustment since January 2013 15.1%, the adjustment is the biggest adjustment since October 2011. The following chart contains the daily workload of the data block chain, thus reflects changes in the overall network difficulty.
(bitcoin prices compared with the daily workload, source: BitMEX Research, Poloniex)
The daily income and cost of mining
As shown below, bitcoin mining industry revenue of $13 million a day from the beginning of November fell to about $6 million a day in early December. Due to the delay of the difficulty of adjustment, such incentives decline even than bitcoin prices fell even more. As of December 3rd during the period of six days, due to the difficulty of adjustment before the miners have left the network, so the number of daily output blocks than the 144 expected by 21.8%. Therefore, in the short term, in addition to currency prices beyond the encryption effect, mining incentive also fell 21.8%.
(bitcoin mining daily income and expected electricity expenditure of millions of dollars, source: BitMEX Resaech, Poloniex; note: if electricity per KWH for $0.05, assuming machine specifications into a bit, the S9 model)
(Bitcoin Cash ABC daily mining income and expected electricity expenditure — millions of dollars, source: BitMEX Resaech, Poloniex; note: if electricity per KWH for $0.05, assuming machine specifications into a bit, the S9 model)
(Ethernet daily income and expected currency mining electricity costs — millions of dollars, source: BitMEX Research, Poloniex; note: if electricity per KWH for $0.05, assuming the 200W output 32Mh/s)
Miners profit rate
The following figure shows, before the recent price collapse, the industry’s gross profit margin of approximately 50% (assuming that electricity is only used to calculate the variable cost, and the gross margin) in price after the collapse of the digital currency bitcoin and Ethernet were decreased to about 30%, and 15%.
(miners profit rate, source: BitMEX Research, price from Poloniex)
Ethernet bitcoin mining profitability
In the meantime, the etheric Fang hash rate declined only 20% (equivalent to about 1 million 500 thousand, the senior graphics) value is much lower than the bitcoin, rather than bitcoin prices fell more significantly, 54%. Therefore, the etheric workshop gross margin fell even more sharply, but it is not clear why this happens.
The following several potential causes. May be because the etheric Fang is more amateur miners and the pursuit of profit is low, or etheric Fang to enter into the market with the miners than bitcoin higher gross margin, so they are less willing to constantly monitoring the network and in the closed mills. If the data show that the gross profit rate of Ethernet Fang miners now bitcoin was significantly lower than that in the past few days, fell to 15%, so the situation may change (Note: this analysis included only when electricity costs, including other costs, miners may exist loss of business situation).
Bitcoin Cash ABC mining profit rate
As shown above, the Bitcoin Cash ABC in the split into bitcoin bitcoin cash and cash ABC SV two encryption currency, its gross margin to negative. The two camps in the competition for the most workload block chain, has been at a loss. In November 25th, ten days after the bifurcation, mining bitcoin cash ABC profit quickly climbed to the same level with bitcoin. This seems to indicate that the “hash” war has ended, but later proved that almost completely meaningless, because the end of the war on the encrypted currency value has no obvious influence.
As in the table below the latest data show that the total workload of both sides again is increasingly close, which can make both sides to return to the mining situation again at a loss.
(data: BitMEX Research, price from Poloniex)
The analysis of the defects
The gross margin analysis is not complete. Although the income figures may be accurate, but the only cost only includes electricity. Obviously, the miners and other costs, such as machine capital investment and the cost of maintenance cost and build a machine. Therefore, in the only considering electricity costs, industry profits are high, but the recent price crash is likely that all the miners are at a loss. This shows that the miners in equipment spending too much, and there have been a negative rate of return on investment.
There is no uniform electricity cost
Another key point is not reflected in the above analysis is the change of electricity. On the assumption that the chart cost per KwH were $0.05; however, not all the miners of electricity are the same.
As we mentioned above, the 31% hash rate during this period is closed, the highest tariff logic should be the first to shut down their ore miners. Therefore, the average cost of electricity network fell sharply in the past month should.
The following table shows the above, it is assumed that the power cost of $0.01 per Kwh standard deviation of normal distribution, but the higher cost of the miners will first turn off the machine. Although this assumption may not be accurate, energy prices will not have a normal distribution in the mining industry, but from a macro perspective, it illustrates the point, it may be more accurate than above.
According to this analysis, bitcoin mining industry average gross margin of only down from 50% to 40%, which means that the rest of the miners is much better.
(for example, bitcoin mining gross margin source: BitMEX Resarch, price from Poloniex)
Down the potential negative impact of bitcoin in the assessment of the price, analysts sometimes forget that not all the miners have the same cost. It is these cost differences continue to ensure the network running smoothly, although prices suddenly dropped sharply and the difficulty to adjust.
What caused the price to drop?
The reason of price collapse has been a lot of speculation, some people say the miners sell bitcoin bitcoin is to hash war funding cash costly. Information encryption currency monitoring platform Boltzmann told us in a few days before they split bitcoin cash, the platform has been detected in November 12th it sold a lot of bitcoin miners.
Boltzmann detected the bitcoin miners net sales “and 3 months average difference of 17.5 standard deviations.” Further analysis, it seems that these miners may be a member of Slushpool.
(bitcoin miners net flow and price, source: Boltzmann, the net flow of miners 12 hours summary)
Although the miners sell bitcoin bitcoin cash hash in war funds is the loss of catalyst prices, but we believe that the impact is easy to be overestimated. Because we are in a bear market, no matter how news or investment flows, prices are down.
In addition, in the bear market, seems to be no news or bad news situation, prices will fall, but the good news is often ignored by the market, but in the bull market in the opposite. We believe that even in the miners have to sell bitcoin bitcoin cash before the split, prices will weaken. In the face of crypto currency market, investors emotion management is the key.
This may be a very difficult period to dig mining industry. However, for the low cost of the miners, our analysis shows that the situation may be better than expected. If the miners equipment is at the price lower than the cost, from the bit to buy even including depreciation and other management costs, they may still be profitable state.