Produced | Odaily (ID: o-daily)

Produced | Odaily (ID: o-daily)

Enter the market following the huge waves, and retreat with the bubbles.

This may be the image of the mining industry last year. At the end of 2017 and the beginning of 2018, the price of the currency rose, allowing the mining industry to absorb people from all walks of life. They snapped up mining machines and bought electricity to build factories regardless of cost, but there was no hope of getting back their money amid the sharp increase in computing power. The sharp drop in currency prices at the end of the year plunged the industry into the abyss. Countless miners shut down and cleared the field, and mining machine giants also laid off employees and shrunk amid the sharp shrinkage of cash flow.

Guests of this issue:

Wang Weinan: Many of my friends who sell mining machines are doing micro-businesses and selling oranges.

Chu Tao: Mining machines are sold as scrap iron.

Chen Feng: Mining can save heating costs.

Wang Weinan: Find cheap electricity.

Chu Tao: Borrowing the famous saying of the big brother-there are three treasures in a bear market: mining, fixed investment, and cold wallet.

Wang Weinan: There are pursuits for companies that want to go public in a bear market.

Chen Feng: Good journey!

Wang Weinan: Anytime, but the state currently encourages private enterprises and innovation. The mines also drive the real economy and employment in the border areas. A lot of electricity in the border area is discarded and waste electricity, and labor-intensive enterprises and factories are reluctant to move there.

Zheng Xun: We will actively respond to the state, but strictly speaking, mines are private property.

Chen Feng: Everything about me belongs to the state, except mines.

Wang Weinan: Brothers, greatness comes from hard work! A widow will become a wife. If you can't stay widowed, can't stand loneliness, and want to remarry and transform, I hope you will be happy in the future!

Chu Tao: The road is long and long, and I will search up and down.

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Question: What do you think is the big event in the mining circle in 2018?

Wang Weinan: On December 3, the difficulty of Bitcoin mining dropped by more than 15%. This means that a large amount of computing power is cut off or even the mine is shut down. It hasn't been like this since ASIC miners, not even during the last bear market.

Chen Feng: The first is the advent of 7nm ASIC chips. The second is the BCH fork. Bitmain and Satoshi Auben disagreed on the development direction of BCH and conducted a costly battle of computing power. In terms of results, there was no absolute winner, but it had a profound impact on the entire cryptocurrency , may become the incentive for short-selling forces to trigger this round of slump.

Chu Tao: 2018 was an embarrassing year for the mining industry. The rapid increase in currency prices last year attracted many investment booms inside and outside the circle, driving up the prices of mining machines and electricity. Investors entered regardless of cost, and left the market at a loss when the currency price went down.

In terms of big things, I want to say two things. One is that mining machine manufacturers go public in Hong Kong. Miners going public mainly hope to obtain more funds to develop new mining machines, purchase raw materials, and ensure cash flow. During the previous bear markets, some manufacturers that fell before dawn were mostly unable to survive due to the exhaustion of R&D funds and working capital, and had to go bankrupt and liquidate. From another perspective, if it can be listed, it can also advertise the popularity and market recognition of mining machine manufacturers in disguise.

The second is the regulatory issue of mines. In 2018, inspections of mines in Xinjiang, Yunnan and other places and documents to guide exits were issued frequently, which made mine owners and miners all over the country panic. They were deeply afraid that the policy would make their investments lose their money. Therefore, a large number of miners plan to choose to go overseas.

Q: Is the low currency price the beginning of a mining disaster?

Wang Weinan: To some extent, mining investment means doing more. The low price of currency is indeed a mining disaster for most people, but those who have low electricity costs and low mining machine costs are still fine. If most people are boiled to death, the difficulty of mining will be reduced, and the income will come back. For example, the price of wheat has been lowered, but the yield per mu has increased.

Zhang Li: 2018 is called a bear market at most, and 2014 is called a "mine disaster". Mining in a bear market is a loss of profit. When the "mining disaster" came, there was no profit at all. Some big guys went bankrupt due to insolvency, like 2014. In 2018, there were those who cut the meat and stopped losses, but they have not yet collapsed.

The current situation is that many retail investors pack up and leave when they lose money. But in 2014, the computing power was small, and if there was a mining disaster, the network would be very dangerous. As a result, a group of people raised money to mine in order to protect network security. By 2017, the wealth of these believers had increased significantly.

Q: How does this year compare to the 14-year bear market?

Wang Weinan: The 2014 bear market is incomparable to this bear market in terms of capital volume and number of users. In 2014, the circle was much smaller, mainly geeks, technology enthusiasts, and some investors who liked high risks. This bear market also includes a group of newly entered P2P people, those engaged in traditional electric energy, traditional Internet cafes, bosses who have transformed computer hardware, etc., and have formed a large-scale industrial chain.

Zheng Xun: The bear market drove a small number of people out of the market, but part of the funds they invested stayed. The influence of the industry or computing power consensus was much greater than that of the previous bear market.

Q: Talk about the overall fluctuation of computing power in 2018 and the industry changes behind it.

Wang Weinan: The computing power has risen from about 13EH/s at the beginning of the year to about 51E at its peak in October, and now the computing power has dropped to about 38E. The change in the industry is that more and more people are entering the market. Mining machine manufacturers are in fierce competition, and technology is also being updated and iterated. In 2018, 7nm mining machines were launched. Although it is a bear market, 30W/T mining machines are likely to come out in 2019, and the competition will be more brutal by then.

Chu Tao: This process is actually a market reshuffle. Small and medium-sized miners choose to shut down or clear their warehouses to stop losses in low valleys, while powerful large miners and large mining farms can buy bottoms and expand steadily. As mentioned above, as some people leave the market, mining in a bear market may also be profitable. On this basis, the reshuffle of mining farms may be more intense, and the future should be a business path towards scale, specialization, industrialization, and compliance.

Q: Why do big miners have to go public?

Chu Tao: The main requirement for mining machine manufacturers to go public is to obtain more funds for research and development of new mining machines, purchase raw materials and ensure sufficient cash flow. During the previous bear markets, some mining machine manufacturers fell before dawn, mainly because the research and development funds of mining machines and their own liquidity were exhausted and unable to support them, so they had to go bankrupt and liquidate. From another perspective, if it can be successfully listed, it is also a disguised advertisement for the popularity and market recognition of the mining machine manufacturer.

Zhu Wei: Avalon is the first manufacturer to announce its listing, mainly because they have a very close interaction with the traditional capital market. Going public is also one of the means of capital market operation, which is normal. After Avalon announced its listing, Ebang and Continental also followed suit. The main reason is that they are both mining machine giants. Since you have gone, I will go too.

Zhang Li: It is quite difficult for manufacturers to go public. This industry has too many ups and downs and is too unstable. Last year, if you heard that the manufacturer was going to go public, you would think it was more funny. But come 2018, there seems to be hope. But when we look at the financial reports of these manufacturers for the past year, it is like riding a roller coaster. Then the Hong Kong Stock Exchange looks at the data of this industry, it is a monster stock, why do you want to come here?

Q: What will mining machine manufacturers do in 2019, to mine heavily? Transformation into service?

Zhu Wei: Digging must be done. The layout of large companies is hard to say. But if you want to transform, you can’t earn a lot. For example, it’s only 30 yuan to reduce the frequency of one mining machine. As for financing, traditional capital sees it very clearly, and they will not send charcoal at this time. Wouldn't it be more cost-effective to pick them up when the manufacturer is willing to sell them?

Chu Tao: I think there are three main aspects:

1. Provide one-stop hosting services for miners, so that customers at home and abroad can provide one-stop solutions from buying mining machines to mine hosting.

2. Surviving large mining machine manufacturers actively choose mines that have undergone "compliance" processing for long-term cooperation.

3. The directly-operated mine may be used to consume its own inventory and computing power, as a mining pool or split and sell the computing power to the outside world.

Q: What will be the core competitiveness of the mining industry this year? Bitcoin production will be halved in 2020, will there be any changes by then?

Wang Weinan: The core competitiveness of the mining industry is three: the first is electricity, the second is the power consumption rate of the mining machine, and the third is the cost performance of the mining machine; this will still be the case in 2020, and it will always be the case in the future.

Chu Tao: Regarding the 2020 Bitcoin production halving, most people have a point of view based on history, paying attention to the big bull market that appears after each halving, and the currency doubling data.

Zhu Wei: (for manufacturers) In a bear market, there is no market for new machines. In other words, the performance of the old machines still in production is similar. This tests the manufacturer's supply chain management and cost control capabilities. Live well if you do well. I think everyone has too much confidence in the market that Bitcoin output will be halved, and it may not be like that by then.

Q: Is it possible for domestic mining circles to embrace regulation?

Li Risheng: I think it is difficult for mines to comply with regulations. To comply with the regulations, the "national team" such as the government and central enterprises must do this. Why do you say that? Use RMB to invest in mining, and exchange it back to Bitcoin to convert it into a legal currency such as the US dollar. For countering US policy risks, it is undoubtedly a strategic reserve, just like industries such as missiles and oil. If it rises to this level, it will be placed in the hands of the country.

Zheng Xun: There are several problems in the mining circle's embrace of supervision. The biggest problem is that it is not clear which department is in charge of it.

Secondly, there is no way to regulate how to prevent people from using mining to evade taxes or even launder money. Because the coins produced by mining are clean and can flow globally, it is difficult for people to trace the source of funds, thus becoming a gray area. To be compliant is to make these processes regulable. We have actually imagined that because the monitoring of legal currency can be done, starting from this may prevent illegal income from flowing into the mining industry, so as to meet the needs of supervision. There may be hope for compliance by then.

(Authors Xue Jiao and Wu Yan focus on mining and blockchain reports, you can add WeChat hxjiapg and BIG-BYE for communication, please note your position and reason)