The coronavirus outbreak in China may impose a longer-term impact on the bitcoin networks mining activity at a time when an estimated 65 percent of its computing power is located there.
While Chinese miner manufacturers see rising demand for new equipment ahead of bitcoins scheduled halving in May, they estimate the disease may limit growth in bitcoin mining power if the situation isnt resolved in the near future because it is difficult to expand or build new machines, according to Kevin Shao, general manager of Canaan Creative's blockchain arm.
Shao told CoinDesk that while there is little doubt miners can maintain the current level of computing power, there is a shortage of new mining machines.
So far, almost every bitcoin miner maker in China Bitmain, Canaan, MicroBT and InnoSilicon faces delays in production and delivery. Bitmain and Canaan, the worlds top two miner makers by market share, have published notices saying the delay of after-sale services until Feb. 10.
Customers want new, top-of-the-line mining models to expand existing mining facilities and replace older machines in anticipation of the bitcoin halving, currently expected to occur sometime in May 2020.
One of the most affected businesses is our mining machine production, Abe Yang, chief operating officer at PandaMiner, told CoinDesk.
Founded in 2013, the Shenzhen-based firm makes mining machines and provides computing power services with nine mining farms.
Not only us, most miner makers have been affected by the outbreak since their factories are based in cities like Dongguan and Shenzhen in Guangdong province, Yang said. During the extended vacation until Feb.10, almost all the production will be halted.
Meanwhile, the lockdown of the city of Wuhan has had a more direct impact on InnoSilicon, whose headquarters is located in the outbreaks epicenter.
The delay currently has not affected our businesses that much since the extension [of the holiday break] will only be several days, Shao said. However, the impact could be much more significant if the outbreak continues for a longer period of time.
According to data from BTC.com, bitcoins mining difficulty a measure of how hard it is to compete for mining rewards on the bitcoin network posted 6.57 percent and 7.08 percent growth on Jan. 2 and Jan. 15, respectively.
The growth rate dropped to 4.67 percent on Jan. 28 and is estimated to decline to 3 percent in about three days. Bitcoins mining difficulty adjusts itself about every 14 days it goes up or down in positive correlation to whether there are more or less participants racing on the network.
The coronavirus outbreak timespan overlaps with bitcoins halving event. The dual factors are apparently affecting the maintenance of mining equipment as well as the delivery of new miners, Wang Xin, marketing director of WhatsMiner maker MicroBT said in an interview. As such, the recovery of bitcoins hash rate growth will be delayed.
Hash power has more than doubled from around 50 EH/s compared to the same period of last year as bitcoins market price climbed over $9,000, according to Shao.
Second-hand miners [mostly older models like Bitmains AntMiner S9] that are aiming at a faster payback period, now have a larger risk as they enter a shutdown period ahead of the halving, compared to more powerful new models [like WhatsMiner M20 or AntMiner S17], said MicroBTs Wang.
Based on f2pools profitability index, models like the most widely used AntMiner S9 would have a 30 percent gross margin at bitcoins current price with an electricity cost of $0.05 per kWh.
However, a lower number of new miners could be good news for those that have already invested in mining equipment with facilities up and running.
Existing miners could see more steady mining rewards because there wouldnt be more competitors to enter the market due to the lack of new mining machines, Canaans Shao said.
But he added that one way the outbreak would affect existing miners is that many mining machine providers might not be able to offer timely post-sale services to fix malfunctioned devices.
Wang said assembly factories have delayed their return-to-business schedule, citing the Chinese government's extension of the Lunar New Year. Businesses in the country have been ordered shut until at least Feb. 10.
This is not a crypto-specific issue either. Reuters reported Monday iPhone sales may take a hit because of the coronavirus, if the health emergency can not be contained in the near future.
Shao said one of his companys concerns is slowing logistics, adding, while we can make all the plans to prepare for the outbreak on our part, logistics is something we cant control.
Local infrastructure now prioritizes distributing necessities and supplies to those who are affected by the virus over less important deliveries, Shao said.
Therefore, some of the customers who pre-ordered miners might not be able to receive the machines on time, and it will take longer to deliver new orders if the outbreak continues, Shao said.
Even if employees all return to work, they cannot assemble miners unless their suppliers provide the necessary parts.
If the supplies can not be delivered on time, miner makers are not going to be able to assemble the production, Shao said.
One way companies can take advantage of their inventory is to run the machines themselves to offer computing power to their clients without selling the actual machines, Yang said. This assumes they have the necessary parts to complete assembling miners.
However, the service is not sustainable if the outbreak continues because we would eventually reach full capacity without new machines, creating a shortage in computing power, Yang said.
Mining farms remain unaffected for the moment, but existing quarantine controls and the possibility of an extended outbreak may soon take a toll.
Yang said PandaMiner is able to maintain operations for its existing farms, but there will be significant delays in constructing new farms.
Two-thirds of the companys employees did not go home for the Chinese New Year, and have instead been working at the mining sites. However, for those who did go home it will take weeks to return to work, Yang said.
Many cities now require a two-week quarantine for people coming back from other areas before letting them go back to work, he said.
For example, the Xinjiang autonomous region, an area that hosts a significant portion of mining farms due to its cheap electricity, has implemented strict policies to quarantine not only those coming back from the Hubei province, where Wuhan is located, but also any other province or region, Yang said.
We asked our employees to come back to Xinjiang as early as possible so that they can start the two-week quarantine and go back to work, Yang said, noting policies may vary among different areas in China.
The companys mining farm in Guizhou is subject to a stricter policy. We are allowed to let our employees work on site and can only keep a few people to maintain the operation, he said.
Sichuan province, which controls over 50 percent of bitcoins hashrate, also requires the two-week quarantine, according to Yang.
The lack of on-site staff has already negatively impacted the management of mining farms, Yang said.
Employees are responsible for ensuring mining machines are connected to the Internet and have a consistent supply of power. The employees would also need to fix broken circuit boards and other hardware to maintain operations, Yang said.
We usually have at least 10 people on staff to maintain a mining farm, Yang said. With much fewer employees, it is hard for us to keep as many machines running as before.
According to Yang, in some extreme cases where the local government prohibits all employees from working on site, companies need to negotiate with the government to leave two or three people on duty.
Wolfie Zhao contributed reporting.
The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.
- Bitcoins Huge Surge This Week Could Be The Tip Of The Iceberg As Investors Recall 2017 Gold Rush - Forbes - April 5th, 2020
- The Price Of Gold And The Price Of Bitcoin - Forbes - April 5th, 2020
- Billionaire Optimistic on Bitcoin as a Flight to Safety - Cointelegraph - April 5th, 2020
- Bitcoins Hedging Performance in the Wake of the Coronavirus Outbreak - Cointelegraph - April 5th, 2020
- Bitcoin Flips Bullish But Heres Why BTC Price May Still Hit $3.9K - Cointelegraph - April 5th, 2020
- Bitcoin Showing Signs of Weakness But 100 SMA Can Trigger New Rally - newsBTC - April 5th, 2020
- Xapo moves $633 million Bitcoin for less than a pint of milk - Decrypt - April 5th, 2020
- Tidal Wave of Lawsuits Accuse Bitcoin (BTC) and Crypto Companies of Selling Unregistered Securities - The Daily Hodl - April 5th, 2020
- Here is why Bitcoin price is likely to be bullish - Cryptopolitan - April 5th, 2020
- Indians Own Bitcoin and Crypto Because Banks Are Incompetent: Survey - Coingape - April 5th, 2020
- Bitcoin (BTC) Is Doing Just Fine Compared to S&P 500 During COVID-19 Crisis. This Chart Shows Why - U.Today - April 5th, 2020
- Just One Major Cryptocurrency Is Outperforming Bitcoin Right Now And Its Climbing Fast - Forbes - April 3rd, 2020
- Ether-Bitcoin Price Volatility Spread Hits 4-Month Low - CoinDesk - April 3rd, 2020
- Bitcoin on the brink of major bullish breakout - Yahoo Finance - April 3rd, 2020
- $8.5K Then $3K This Traders Bitcoin Price Call Is Playing Out - Cointelegraph - April 3rd, 2020
- Bitcoin.com Fires 50% of Staff Ahead of BCH Halving - Bitcoinist - April 3rd, 2020
- Pressure Test That Signaled Bitcoin (BTC) Bull Run Flashing As Ethereum and XRP Hit Crucial Lines of Resistance - The Daily Hodl - April 3rd, 2020
- Bitcoin (BTC) Price Targets $7,600 with Chance to Hit $8,900 Later - U.Today - April 3rd, 2020
- How COVID-19 Is Changing Narratives From Bitcoin to DeFi - CoinDesk - April 3rd, 2020
- Bitcoin's Safe-Haven Status Is Not Dead as Correlation to Gold Reaches New Highs: Report - U.Today - April 3rd, 2020
- Darknet and Bitcoin: Ominous trends affected by COVID-19? - Cryptopolitan - April 3rd, 2020
- Cryptocurrencies advance as Bitcoin was rejected at the $7.200 level - FXStreet - April 3rd, 2020
- CoinShares Strategist Meltem Demirors Issues Warning About Digital Dollar Its Everything Bitcoin Is Not - The Daily Hodl - April 3rd, 2020
- Bitcoin Climbs More Than 15% As Investors Flock To Safety - Forbes - April 2nd, 2020
- Bitcoin Briefly Tops $7K as Traders Say Worst of 2020 Selloff May Have Passed - CoinDesk - April 2nd, 2020
- Heres Why Bitcoin Price Just Spiked to $7.3K, Liquidating $90M - Cointelegraph - April 2nd, 2020
- Crypto Traders See Bitcoin (But Not Ethereum) Surging To All-Time Highs In 2020Heres Why - Forbes - April 2nd, 2020
- Bitcoin Closes Q1 With Historic Darth Maul Candle: Heres What it Means - newsBTC - April 2nd, 2020
- Could Coronavirus Kill the Bitcoin Mining Industry? - Finance Magnates - April 2nd, 2020
- Bitcoin Price Analysis: BTC Surges 9% And Will Set Up A Strong Rally IF We Can Close Above This Pattern - Coingape - April 2nd, 2020
- Revolut brings Bitcoin to all of its 7 million users - Decrypt - April 2nd, 2020
- Bitcoin Stuck In Bearish Trend As The New Month Begins - Forbes - April 1st, 2020
- Bitcoin Takes Tumble, Traders Fret Correlation and Next Month's Halving - CoinDesk - April 1st, 2020
- A Bitcoin Bastion In The Wild West - Forbes - April 1st, 2020
- Bitcoin Bros Are Directing Their Powerful Computers Toward Coronavirus COVID-19 Research - Forbes - April 1st, 2020
- Massive $633 Million Bitcoin (BTC) Transaction Triggers Crypto Whale Alert - The Daily Hodl - April 1st, 2020
- Cryptocurrencies price prediction: Bitcoin, Ethereum & Litecoin - American Wrap - 01 April - FXStreet - April 1st, 2020
- Can Bitcoin Survive the Climate Change Revolution? - CoinDesk - April 1st, 2020
- Bitcoin Follows Stock Markets Higher; How Long Will They Move in Lockstep? - CoinDesk - April 1st, 2020
- Bitcoins on the Move Is BTC Price Inversely Correlated to Mempool Size? - Cointelegraph - April 1st, 2020
- Here's how much bitcoin beat the Dow and S&P 500 in the first quarter - CNBC - April 1st, 2020
- Bitcoin Holding Crucial Support: Heres What Could Propel it to $7K - newsBTC - April 1st, 2020
- Is Now the Time to Invest in Bitcoin? - Cointelegraph - April 1st, 2020
- This Crisis Is Good For Bitcoin, But Beware of Recession - Luno CEO - Cryptonews - April 1st, 2020
- Top Three Coins Price Prediction: Bitcoin bears take control while Ethereum and Ripple still remains in the green - FXStreet - April 1st, 2020
- Bitcoin Ascends on Twitter While Major Altcoins Hit Multi-Year Lows - Cointelegraph - March 27th, 2020
- Bitcoin Is a Safe Haven for a Worse Storm Than This - CoinDesk - March 27th, 2020
- Japanese Investors Rushed To Buy The Dip After Bitcoin Bloodbath - Cointelegraph - March 27th, 2020
- Bitcoin community responds to FDIC warning on bank run - Decrypt - March 27th, 2020
- Binance Reveals Visa Debit Card in Push to Bring Bitcoin (BTC) and Crypto Payments Worldwide - The Daily Hodl - March 27th, 2020
- Just Like Bitcoin Before It, Cardano Is Banned From Wikipedia - Cointelegraph - March 27th, 2020
- How would a US recession affect Bitcoin? - Decrypt - March 27th, 2020
- Are Miners Waiting for Bitcoin to Hit Breakeven Point? - Cryptonews - March 27th, 2020
- Feds Unlimited QE Places Spotlight on Bitcoin Store-of-Value Narrative - Cointelegraph - March 27th, 2020
- Vitalik Proposes Solution to 'Embarrassing' Lack of BitcoinEthereum Bridge - Cointelegraph - March 27th, 2020
- Bitcoin Will "Come Of Age" During This Crisis: Top Investor Explains Why - Blockonomi - March 27th, 2020
- Algorithmic Crypto Art Changes Appearance to Reflect Bitcoin Volatility - Cointelegraph - March 27th, 2020
- Heres How To Predict Major Moves In The Price Of Bitcoin - Forbes - March 23rd, 2020
- Bitcoin Just Reversed and Its Vulnerable To A Drop Towards $5,200 - newsBTC - March 23rd, 2020
- Did BTC Miners Crash Bitcoin Price With 51 Days Before the Halving? - Cointelegraph - March 23rd, 2020
- Bitcoin Price Analysis: Bitcoin Steady Above $6,000, But Is It The Calm Before The Storm? - CryptoPotato - March 23rd, 2020
- Bitcoin Highly Correlated With HYG And IWM ETFs As Contagion Effect From Coronavirus Epidemic Spreads Across All Asset Classes - Forbes - March 23rd, 2020
- Top 3 Price Prediction Bitcoin, Ethereum, Ripple: A sea of red returns as weekend love disappears - FXStreet - March 23rd, 2020
- Tezos Foundation Offloaded Millions of Dollars Worth of Bitcoin in 2019: Report - CoinDesk - CoinDesk - March 23rd, 2020
- The Internet May Be Next Victim of Coronavirus Pandemic Netflix, Google, Apple and Amazon React - Bitcoin News - March 23rd, 2020
- Bitcoin Price (BTCUSD) is Off to a Bullish Start; Can It Sustain Gains Above $5,900.00? - InvestingCube - March 23rd, 2020
- Bitcoin Price Analysis: BTC Might Drop Beneath $4,800 Again If It Breaks THIS Short Term Trend Line - Coingape - March 21st, 2020
- Top 3 Coins Price Prediction: Bitcoin, Ethereum and Ripple consolidate their price following as bulls and bears wrestle for control - Confluence... - March 21st, 2020
- A factor that predicted the Bitcoin crash in 2018 suggests bullish action is ahead - CryptoSlate - March 21st, 2020
- Bitcoin's Difficulty on Track for Historic Drop, but There Is Silver Lining - U.Today - March 21st, 2020
- Bitcoin ranked on top 100 greatest designs of all time - Decrypt - March 21st, 2020
- The Puell Multiple Is Turning Bullish on Bitcoin - CoinDesk - Coindesk - March 20th, 2020
- Bitcoin Is Fast Approaching $7,000Heres Why - Forbes - March 20th, 2020
- Contrary To Popular Belief, Bitcoin Isn't Consistently Correlated To Anything - Forbes - March 20th, 2020
- Bitcoins Magic Is Fading, And Thats A Good Thing - Forbes - March 20th, 2020
- Bitcoin Rally Leaves Stocks In The Dust - Forbes - March 20th, 2020
- Coronavirus is forcing fans of Bitcoin to realize its not a safe haven after all - MIT Technology Review - March 20th, 2020
- Bitcoin Is Back In Free Fall And Dropping FastHeres Why - Forbes - March 20th, 2020
- Top Analyst Explains Why Bitcoin Price is Up 78% amid Coronavirus Outbreak - newsBTC - March 20th, 2020
- A Treatise on Bitcoin and Privacy Part 2: Dont Be Misled by Red Herrings - Nasdaq - March 20th, 2020