China’s Rainy Season Is Coming. This Time Bitcoin Miners Aren’t Investing

Spring is usually a welcome time of year for bitcoin mining businesses in China. The upcoming rainy season brings excessive hydropower, making electricity cheap and mining more profitable … all else equal.

This year, however, two key variables have changed, upending the calculus for operators of mining facilities and for miners themselves in the world’s hub for this activity.

After recovering from March’s brutal selloff, bitcoin’s price has been stagnating around $7,000. As a result, mining farms that offer hosting services are struggling to find enough customers to fill capacity.

Further, the standstill comes just before the network’s halving event, due in less than 20 days, which will put further pressure on revenues in the multibillion-dollar bitcoin mining industry.

Read also: Bitcoin’s Halving, Explained.

The situation presents a conundrum for miners: whether to buy new, more powerful equipment; and if not, when to switch off older models, and when to switch them on again. The winning move will depend on how things play out after the halving, which is far from certain.

“If bitcoin’s price doesn’t go up post-halving, then who’s going to buy new equipment to fulfill this capacity?” said Huang Fangyu, co-founder of ValarHash, the company behind the mining pool 1THash, which owns facilities primarily for self-mining in Sichuan and sells cloud mining contracts.

20 percent off

As they game out the scenarios, miners at least enjoy a glut of space to host their machines. Mining facilities in China’s water-abundant southwestern provinces during the summer are offering electricity prices for as much as 20 percent lower than what they did last year in order to attract investors, industry experts say.

Research firm CoinShares estimated in a December report that China accounted for 65 percent of bitcoin’s global computing power and the southwestern Sichuan province alone accounted for over 50 percent of the network’s total.

Huang said based on…

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