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5 Reasons Why Miners Haven’t Shut Down Despite the March Crash

Why Miners Haven't Shut Down

Despite the recent crash on March 13, triggered by the Coronavirus or Covid-19 outbreak that shook the entire global market and sending Bitcoin prices to $3600, miners in China continue to run their operations. Even though a number of small players have been severely impacted as they were told to halt operations given the virus pandemic in China, or were liquidated due to their high leverage plays with crypto lenders during that time, many miners continue to stay in the game.

Global Coin Research investigated the top reasons why miners continue to run their farms despite the recent market crash, which many media publications have touted to have blown up miners. But a closer look is required to understand the current crypto outlook for these miners.

5 Reasons Why Miners Haven’t Shut Down

  • Still Profitable: Despite the market crash, mining hubs such as those in Southwestern and Northwestern China continue to run and operate normally. They have yet been affected by the Coronavirus pandemic early, and a number of them have set up the farms early enough at this point where even at the $3600 point, they continue to be profitable.

  • Need to Maintain the Mining Farms Capacity: There are certainly a number of mining farms that are seeing profitability drop to zero or going into negatives, but as they anticipate the halving and ongoing market inflections, they continue to keep the machines running. Some of them have encountered the situation where even if they wanted to turn off the machines, their contract with the local electricity provider has indicated that they’ll be penalized if they were to only keep a handful of machines in operation, as their electricity prices will be raised.

  • Untouchable Miners: In the last year, Iran has become a go-to location for miners to set up farms, given the extremely low electricity cost and previously-loose-but-increasingly-scrutinizing local regulations. In this most recent crash, it appears that the mines set up in Iran have not been affected at all. Even though Covid-19 has been spreading rapidly and Iran is one of the highest risk countries at the moment, the epidemic has yet to spread to the mining hubs in Iran. Most of the crypto mining in Iran are located in central and southern Iran, while the epidemic has mostly been concentrated in the north. Miners locally have said that they continue to operate profitably.

  • Cautious about Leveraged Lending: While Bitcoin and USDT lending has evolved into an increasingly common and sophisticated business, especially in Asia as we’ve seen the rise of some of the most active crypto lenders in the space- Matrixport, Babel, Binance and others, miners remain cautious. Despite Babel announcing that they’ve seen over $380mn worth of lending loans with around 60% coming from miners, miners continue to avoid putting themselves into an excessively leveraged situation.
  • Part of the reason that Bitcoin price went down all the way from ~$9k to ~3k so quickly in a matter of days was also because of the amount of liquidation triggered by the lending players. So while miners may feel the need to pawn their Bitcoin to set up mining operations and maintenance expenditures, those who were not overleveraged with the lenders did not get impacted as severely.

  • Strong Conviction Over Competition When Comes to Halving: Lastly is the miners have a strong conviction in the halving, which is coming around mid-May in a month a half. Despite that mining rewards will get halved, the positive outlook from the miners is that this time around, Bitcoin’s halving coincides with the flood season in China. Unlike the previous two halvings in November 2012 and July 2016, this Bitcoin halving will coincide with a seasonal period that will render significantly cheaper electricity.
  • In western China where many of these farms are located, the flood season often comes in during the summer, but it is anticipated to come in earlier this year. In preparation for the flood season, miners have already began updating their mining machines. Those who are prepared are at a significant advantage. As the Covid-19 epidemic and market drop in early January caused many mines to suspend their operations, combined with shipments from the mining machine manufacturers having delayed and remain in small quantities, the mines that have prepared in 2019 will benefit greatly.

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