Bitcoin miners learned the hard way that Bitcoin mining is still a Wild West after Bitcoin’s price tanked to a new 13-month low last week. According to data from CoinMarketCap, Bitcoin’s price is now below $4,300, a far cry from its peak value of almost $20,000 in December last year.
The entire crypto market has shed off more than $600 billion from its January peak of over $800 billion. As the crypto market continues to tumble, some Bitcoin miners are forced to shut down their businesses as Bitcoin mining becomes no longer profitable for them.
Bitcoin’s Plummeting Price and Its Effect on Miners
Bitcoin has been in correction mode since the beginning of the year but had managed to hold the $6,000 resistance level until its price fell by almost 30 percent and sank below $4,500.
The latest developments in prices have left crypto miners – entities who use massive computing power to solve very difficult mathematical puzzles to mint new coins – in a dangerous position. The miners are rewarded with coins which they sell for profit.
It has become unprofitable for mining entities to use at least four models of Bitcoin mining rigs if they use power at a rate of $0.06 per kilowatt-hour (kWh), reported the South China Morning Post on Nov. 22nd.
Cryptocurrency mining has shifted from being a one-man job to a massive industry with big companies who are prepared to invest millions of dollars before they can see any return on their capital. To overcome this problem, miners combine their computing power in order to stand a better chance of solving the mathematical puzzle and get Bitcoins in return. This has given birth to the so-called Bitcoin mining pools.
Bitmain, Canaan, and Ebang International are all major Chinese players in the crypto mining sector. Each of them had separate plans to file for an IPO (Initial Public Offering) at the Hong Kong Stock Exchange. However, their prospects no longer look so bright. Canaan allowed its six-month IPO application to expire last week.
The South China Morning Post reported that a group of anonymous Chinese Bitcoin miners has already shut down 20,000 mining rigs. However, this downturn could become an opportunity for other mining players operating in countries such as Russia and Venezuela where electricity is cheaper.
Did Bitcoin Cash Fork Crash the Market?
Bitcoin’s price is moving in a different direction to what analysts had predicted at the beginning of the year, with many of them claiming at the time that Bitcoin’s price would reach $25,000 or more. Some have gone on to adjust their predictions according to the situation on the ground.
Bitcoin showed a sign of maturity when it remained relatively stable as the stock markets tumbled amid massive sell-offs.
It seems that the current round of price drops was triggered by the Bitcoin Cash fork wars between Roger Ver, who has the support of Bitmain, Coinbase, and Binance among others and Craig Wright, who previously claimed to be Satoshi Nakamoto and has the backing of a few crypto news outlets.