Securities Times: Huaqiangbei mining machine market is warming up and venture capital money is also flowing into blockchain

Source: Securities Times

Reporter Li Mingzhu Wu Jiaming

The sharp rise and fall of Bitcoin prices has become the norm, but the mining behind Bitcoin has once again become the focus of heated discussion in the market. Recently, the Inner Mongolia Autonomous Region Development and Reform Commission released the "Several Guarantee Measures for Ensuring the Completion of the 14th Five-Year Plan Energy Consumption Dual Control Target Task (Draft for Comments)", which mentioned that backward and excess production capacity will be eliminated and resolved at an accelerated pace. It mentioned that virtual currency mining projects will be completely cleaned up and shut down, and all will be withdrawn by the end of April 2021.

Behind the craze of virtual currency mining, mining, as a high-energy-consuming project, has always been questioned because it does not meet the labels of energy conservation, emission reduction, and power consumption. In this regard, the reporter once again went to Shenzhen Huaqiangbei to see the ups and downs of this store where many "mining machine stories" were born.

Mining machine prices rise

Yunnan, Guizhou and Sichuan become the "focus"

As we all know, Bitcoin is mainly mined. In fact, "Made in China" has firmly monopolized the design and production of various mining machines in the past few years, and Shenzhen Huaqiangbei has become one of the largest mining machine sales distribution centers in the country and even the world.

Taking the escalator to the 4th floor of Huaqiangbei SEG Plaza, the word "mining machine" is still very eye-catching. In 2017, Bitcoin experienced a round of skyrocketing prices. The mining machine stores here are very popular. Many stores that originally sold assembled computers have been converted into mining machine stores. In recent months, although the price of Bitcoin has fluctuated, it has generally achieved a considerable increase. The reporter found that the stores selling mining machines are still there, but there are also some "empty shops". "Compared with the end of last year, there are fewer empty shops. Business has been good recently and there is a great demand for mining machines." Manager Chen, the owner of a mining machine store, said.

The rising price of Bitcoin has led to a surge in demand for mining machines. Investors have purchased more high-computing mining machines, hoping to gain more stable returns by increasing computing power while the price of the currency is high, which has driven up the price of mining machines. "These Aladdin L230T machines cost 6,850 yuan, but it is difficult to get them now," said Manager Chen. "In the middle of last year, an Antminer S19 sold for about 15,000 yuan. Now the spot price may be more than 50,000 yuan, and new ones are almost gone."

The reporter logged into Bitmain's official website and found that all models of its Antminer were sold out, and there was no timetable for the new products to be put on the shelves. "Basically, there is no need to go to the official website to make reservations, because all the machines there are booked by agents and then resold. Many people are speculating on mining machines again." A merchant engaged in the mining machine business in Huaqiangbei told the reporter.

A small digital currency mining machine, after being purchased from Shenzhen Huaqiangbei, may be sent to a mine thousands of miles away. Ordos, Inner Mongolia, once famous for its "ghost town", was once the focus of market attention. In fact, the Inner Mongolia Autonomous Region's plan to clean up and shut down virtual currency mining is not a surprise attack. Public information shows that as early as November 2019, the official website of the Inner Mongolia Autonomous Region Industry and Information Technology Department issued the "Notice of the Inner Mongolia Autonomous Region Industry and Information Technology Department, Development and Reform Commission, Public Security Department, Local Financial Supervision and Administration Bureau, and Big Data Development Management Bureau on the Inspection and Rectification of Virtual Currency "Mining" Enterprises".

"In addition to Inner Mongolia, we usually contact local mines in Sichuan and Yunnan for hosting, and hydropower is also more environmentally friendly. We have also encountered some mines being closed, so we will try to choose some places that are more remote and less crowded." Another Huaqiangbei mining machine seller said, "The flood season from March to April is coming soon, and we must have some fun."

It is reported that there are a large number of hydropower stations built in Yunnan, Guizhou and Sichuan. Previously, due to the poor transmission channels, hydropower resources could not be effectively allocated nationwide, and the amount of abandoned hydropower continued to increase. At the beginning of 2021, the Sichuan Electric Power Dispatching and Control Center stated that the annual hydropower utilization rate in Sichuan Province in 2020 was finally fixed at 95.4%, and the results of hydropower consumption were remarkable. Some market insiders also said that with the changes in the domestic virtual currency mining environment, many former domestic mine owners have chosen to set up mines in countries such as Canada, Iceland, and Kazakhstan to circumvent regulatory governance.

Just after hitting a bottom of $43,000 on March 1, the price of Bitcoin rebounded and returned to a high of $50,000 during the Asian trading session on March 2.

Institutions flock to invest in blockchain

The crazy rise of Bitcoin has also triggered the primary market's pursuit of mining companies. According to a Securities Times reporter, domestic venture capital institutions have recently accelerated their investment in mining companies. A large number of companies have obtained financing, but due to the particularity of the industry, most of them are still in the stage of not being disclosed.

According to the reporter's understanding, Qiming Venture Partners has also invested considerable resources in blockchain, which is personally managed by the core founder Kuang Ziping. He previously stated in a public forum that he became interested in the blockchain field a few years ago and tried to invest in some projects as a new recruit about one or two years ago.

He believes that the general direction of blockchain may fundamentally change the architecture of the Internet and even the financial architecture in the next ten or twenty years, so he has plunged into investment in this industry without hesitation. When it comes to specific investment methodology, Kuang Ziping said that when investing in a blockchain infrastructure project, it is still necessary to consider the technology and where it is used. He hopes that there will be more projects in China that truly implement and utilize blockchain technology, and he is very much looking forward to the day when blockchain commercialization scenarios can come soon.

In the view of Huang Yanhua, Vice President of Qifu Capital, blockchain itself is a relatively large track and a direction for future industry development, which will be increasingly valued. Because blockchain is decentralized, it is a cryptographic protocol in principle, and this protocol cannot be tampered with, so it will be recognized by more people. He is more concerned about mining in the direction of IPFS. This type of company is essentially building distributed storage computing power. Unlike Bitcoin mining, it does not consume so much energy, and mainly solves technical problems, such as data packaging, storage, search and other applications.

The popularity of the Bitcoin market has also stimulated new enthusiasm for investment in the entire blockchain industry, not only in China, but also overseas. Internationally renowned venture capital institutions including the Singapore Government Investment Corporation (GIC), Japan's SoftBank Group (UK), and SIG have all made frequent investments in recent times, with a unified direction of investing in various blockchain platforms, from the seed stage to the later stages.

From the perspective of overseas markets, NorthernData, a large European Bitcoin mining company, was also reported at the end of last month that it was considering listing in the United States. NorthernData is headquartered in Germany and its largest mining facility is located in Rockdale. It is one of the largest mining companies in the world. The company currently plans to raise $500 million through an initial public offering. According to people familiar with the matter, Swiss investment bank Credit Suisse will serve as its lead underwriter.