On March 12, led by BTC, cryptocurrencies plummeted. The most significant drop exceeded 40%. Such drastic declines are rare. The harsh realities of the rapid BTC price drop and the upcoming "halving" bring great challenges for miners. Has the benefit of BTC halving been exhausted? How is everything going for miners? What kind of price recovery will be needed for miners to make a profit?
After the crash: When the market goes crazy, profits are made through long-term commitment
The March 12 BTC crash raised big questions about Bitcoin's ability to avoid risks. Members of the crypto community joke about the crumbling faith in Bitcoin as they ponder over the issue.
Though there are many theories as to why the crash happened, most agree that the crypto sector suffered from impacts of the traditional investment market as it needed massive funds to maintain stability due to the shrinking funds caused by the COVID-19 pandemic and global economic crisis. The liquidity crunch, together with the impact of futures and leverage, eventually led to extreme market swings. In addition, the simultaneous decline of token prices and the US stock market was the result of certain key factors. First of all, the biggest funding channel USDT is anchored to the dollar. Secondly, Bitcoin has always been dollar-denominated. The dollar brings great risks because the United State may no longer be the largest economy in the future due to its poor performance in controlling the pandemic. For the crypto sector, one significant impact of the pandemic will be the diversified development of stablecoins. For instance, there may emerge stablecoins anchored to RMB or gold.
The dramatic drop reduced the profit margins of mining. Some mining machines run the risk of temporary shutdowns as the token value fails to cover the electricity fee. At the same time, the crash also depressed miners. Should miners keep mining? CEO Wilson Guo said:
"Is there still a future for mining? As the foundation of PoW, mining cannot support the operation of the Bitcoin network without the hashing power from mining machines. Although the era of massive mining profits has ended, it remains the most profitable business, except for monopolized sectors. The present profits are indeed low, but we should be more patient. Mining in itself is a mid-long term investment choice. Low token prices mean reduced mining difficulty, and more tokens will be mined from the coin-margined contract."
Before btc price halving, a victim to market swings says: mine in the bear market and speculate in the bull market
Confronted with the extreme market conditions and the upcoming halving, miners face increasing pressures. CEO Wilson Guo suggested that mining is an arms race, and you need the best conditions for the final victory. Right now, miners need adjust their mentality and cope with anxiety. He mentioned that most miners are firm believers in the Bitcoin network. Though some may think that such remarks are hollow and superficial, the continued and stable operation of the Bitcoin network is a bottom line many veteran miners feel obliged to maintain, unless they have no other choice. Miners cannot meet the tough challenges ahead with passion alone, and survival of the fittest is inevitable. CEO Wilson Guo said:
"If you want to find out the BTC price that would allow the survival of miner models with low hashing power, we have estimated that S9 miners can survive only if BTC falls in the price range between $11,000 and $13,000."
CEO Wilson Guo also mentioned: As for the heated debate on "mining crash", for example, if BTC soon rebounds to the price range between $11,000 and $13,000, most S9 miners on the market would resume functioning, and the network hash rate and mining difficulty would soar. After the halving, the BTC price may plummet to $3,000 in the early stage of difficulty adjustment. In this context, a "mining crash" that everyone "predicted" may occur. However, this crash will not just hit Bitcoin. There will be an industry-wide impact. After all, Bitcoin is the most stable mainstream cryptocurrency and the most mature application of blockchain technology.
A mining crash is generally considered to be an incident that threatens the Bitcoin network security with the large-scale shutdown of mining machines. Shutdowns happen frequently because old mining machines are eventually replaced by newer models. In this case, the difference is that "part of" the mining machines are outdated earlier due to systemic risks. Essentially, they are all the same, and there will be no crash.
Many miners have braced themselves for the upcoming halving and have once again adjusted mining strategies, such as converting thermal power to hydropower. Given that the price of mining machines has fallen by nearly 50% to 70% from the peak last year, the current market is easily accessible to newcomers planning to invest in cryptocurrencies. Furthermore, we can tell that the price of mining machines has nearly bottomed out since the recent drops of token prices had little impact on it. CEO Wilson Guo emphasized that the black swan incident of the pandemic and the demand for 5G this year will have a significant impact on semiconductor producers. As such, it will become harder to obtain high-quality mining machines with low power consumption. For potential buyers, now is the time to select a mining machine. Based on his own experience, one of our miners advised: mine in the bear market and speculate in the bull market.
This is what this AMA is about. We are in a special period between a drastic decline and the upcoming halving. Faith has once again become the key. It can help you make huge profits, but it may also make you lose everything. People in the dog-eat-dog crypto world should be faithful and rational. We hope that everyone can survive and manage the challenges ahead. Finally, let us sum up using a quote from CEO Wilson Guo:
"Things change instantly. The next investment opportunity? I hope it will be a surge in the BTC price."