There has been news going around that major mining rigs in China have shut down as a result of reduced profitability due to reduced hash rate.
According to the information, many miners say they have been mining at a loss for months but can no longer afford to continue because of increased electricity tariffs due to the dry season, a key player in the Chinese Bitcoin mining industry Dovey Wan said
“…Many miners are mining at loss at the current price point, now it’s more economic to turn it off and take it off from the rack to reduce cost on electricity and opex,”
In order to make some profit, some miners have moved to Bitcoin Cash network while those who want to sell their equipment have to do so at a heavy loss since demand for the equipment has also reduced greatly.
This story may seem true in China but the crypto community outside has dismissed it as nothing but rumors.
There may be some truth in it however because miners have abandoned mining facilities in several places. The most recent was the sudden disappearance of miners in a county in Sweden leaving behind electricity bill of $1.5 million. Another mining company in the process of setting up also abandoned its facility halfway because it could not afford to pay rent.
This series of events, therefore, suggest mining may be declining in profitability thus discouraging several miners, some of which have switched to other cryptocurrency networks.
Prior to the shut down in Chinese cryptocurrency mining farms, the government which has not been friendly to the industry, conducted a “strict tax” inspections and check registration information to ensure maximum compliance with the tax laws.
As if that was not enough, the mining farms were asked to sign an undertaking to comply with “higher standards for the company’s business real-name system,” in line with China’s laws.
Since the shutdown for the inspection caused a loss of over $143,000, miners have found it hard to get back on their feet so it is not surprising that they are shutting down permanently at this time.
If the price of Bitcoin does not bounce back soon, we might be witnessing more miners shutting down as the cost of mining Bitcoin is enormous and miners may not be able to pay for electricity consumption at the current rates.