Bitcoin is aiming for $19,000, but mining machines seem to be insufficient

Content Overview:

1. At the time of writing, according to Coingecko data, the price of Bitcoin has reached $18,317.34, approaching the high of $19,000 step by step;

2. Some of the most powerful mining machines from mainstream Bitcoin mining equipment manufacturers are sold out, and it seems difficult to book them again before May 2021;

3. Institutions outside China have always been the main purchasing power for Bitcoin mining machines, but even so, overseas computing power has not achieved significant growth;

4. As the threshold for Bitcoin mining becomes higher and higher, many Chinese Bitcoin miners have begun to turn to Ethereum mining.

For some mainstream Bitcoin mining equipment manufacturers, a new round of bull market is driving continued growth in business. Now that the demand in the Bitcoin mining market has exceeded supply, batch reservations for mining machines from these manufacturers have begun to queue up. It is expected that it will be difficult to successfully obtain the latest Bitcoin mining machines before May 2021.

Judging from the current market demand for Bitcoin mining machines, institutional demand is accelerating.

According to information displayed on Bitmain’s official website, the company’s flagship mining machine products AntMiner S19 Pro, S19 and T19 will take at least half a year to deliver, which means that pre-ordered Bitcoin mining machines shipped before May 2021 have been sold out.

Similarly, Bitmain's biggest competitor MicroBT also disclosed on its official website that its flagship WhatsMiner M30 series mining machines have also been "sold out". A spokesperson for the company told The Block that future pre-orders for mining machines have been received from April to May 2021, and the production capacity is currently only sold a few months ahead, and is basically "out of stock."

There are many reasons for the shortage of Bitcoin mining machines. In summary, there are three main problems:

1. Starting from the third quarter of 2020, the price of Bitcoin has risen sharply;

2. As the price of Bitcoin rises, institutional clients’ demand for Bitcoin mining equipment increases;

3. Bitmain and MicroBT chip suppliers have limited wafer production capacity.

According to a spokesperson for MicroBT, they are working hard to get more chips from Samsung to meet more future orders; on the other hand, Bitmain is also actively purchasing chips from TSMC. Of course, distributors under these Bitcoin mining machine manufacturers can still provide a small amount of spot inventory to meet previous order needs, although there is a lot of premium space. For miners, the first consideration when choosing a mining machine is the computing power, because the higher the computing power, the faster the mining speed and the higher the profit. Basically, the computing power of the mining machine is determined by the performance of the chip. The chip is a precision component. The upgrade of its computing power requires breaking through technical barriers. It is a long process from research and development to production. These factors also cause the supply of mining machines to be unable to keep up with changes in market demand.

According to relevant quotes posted by some mining machine distributors on WeChat, the order price of Bitmain's AntMiner S19 Pro spot inventory is between US$3,800 and US$4,100. In early November 2020, the spot inventory quotation of the same model was around US$3,300 per unit. In addition, according to the order price of AntMiner S19 Pro shipped in April this year, the model was sold for US$2,684 at the time.

Generally speaking, after the Bitcoin price soars, there will be a shortage of Bitcoin mining machines. This phenomenon has actually occurred before. For example, similar situations occurred in the bull market cycles in June 2019 and 2017. However, this year seems to be different. You will find that the purchasing power of mining machines in 2020 is more consolidated, and the increased market demand mainly comes from overseas markets outside of China.

Foundry, a subsidiary of Digital Currency Group, mainly provides Bitcoin mining equipment procurement services, and also provides financing services to mining machine operators in North America. Mike Colyer, the company's CEO, revealed:

“We have many customers who want to buy more than 1,000 bitcoin mining devices at a time.”

Mike Colyer went on to explain that a large number of Bitcoin mines have been built in the North American market in recent years, but the products of many wafer semiconductor manufacturers do not seem to keep up, and they have not allocated enough chip supplies to mining machine manufacturers as in the past.

Kevin Dejun Ge is a veteran Bitcoin miner who has been mining in China since 2017 and is now a partner at Bitcoin mining fund company Miners.Fund. He shared some of his views on the recent Bitcoin mining machine market:

"In 2020, the purchasing demand for ASIC mining machines by Chinese mining machine operators has been greatly reduced. Basically, starting from the third quarter, the production capacity of mining machine manufacturers has been sold to overseas buyers. The production capacity of MicroBT and Bitmain has basically been bought out by large Bitcoin mining operators and funds. In the future, they will either use these mining machines for mining themselves or choose to resell them when the price is high."

According to Kevin Dejun Ge’s observation, currently, the single order of institutional mining machine buyers is usually around 15 million US dollars, and a single purchase transaction starts with 5,000 mining machines. However, Kevin Dejun Ge believes that the growth of Bitcoin mining machine purchasing power in the overseas market will not necessarily lead to a decline in China’s computing power. He explained:

“The purchase order only reflects the contract between Party A and Party B. The final destination of the miners depends mainly on market conditions.”

A big reason why large institutional buyers place orders "crazily" is that by doing so they can enjoy substantial discounts in advance, while "betting" that the price of Bitcoin will rise sharply when the mining machines are shipped. This means that even if these buyers do not use the mining machines for mining after receiving them, they can still make a fortune from the price premium by selling them back to local Chinese miners. This is also in the interests of overseas institutional buyers.

At the same time, for existing participants in the Bitcoin mining market, especially Chinese retail mining operators, the barriers to entry (or expansion) in the Bitcoin mining market are becoming increasingly high, even daunting. In addition to the severe shortage of mining machines, the halving of Bitcoin mining rewards in May this year also greatly reduced miners' profits, and the mining difficulty once reached an all-time high - at the time of writing this article, according to BTC.com data, the Bitcoin mining difficulty of the entire network was as high as 18.96 T.