July 19, 2024

And That is why Bitcoin Mining firms are being Shut down

Recently there is news that Japanese E-Commerce giant DMM is shutting down its large Bitcoin mining Firm. It was very big news as DMM is also one of the 16 licensed cryptocurrency exchanges based in Japan. For supporters, it’s not welcoming news when Bitcoin has been deprived of its share of trust among the new investors. Through this article of blockchain believer, you can get a better idea why recently a lot of Shutting occurrences taken place in the last few months.

Previous Bitcoin Mining firms Shutdown

DMM’s mining business shut down is not the first instance as some major tech Giants in the recent past have also shrugged away the mining practices. Profitability is the main factor that keeps the mining activities running and it is no more in the scene with the dropping value of the Bitcoin. Recently Nvidia openly admitted that the sales were on a considerable declining pattern as Crypto miners considerably discouraged the Bitcoin mining. Additionally, the Chinese mining bigwig Bitmain rumored to have layoff plans in multiple rounds where the staff size was cut down with an expectancy of up to 50%

Background

Readers should first understand what is pushing the Crypto miners to shut down? To put it short, Bitcoin is created by the miners for which they need high-performance Mining Rigs consisting a combination of hi-tech tools and integrals like Ultra high GPU and processors. It is a costly affair as well as time taking in nature. Additionally, the mining costs surged up heavily in the past 6 months making the mining business even more challenging.
The Falling price of Bitcoin is leaving these miners to run for the money as now even if we keep the profits aside with the huge investment they are unable to achieve the break-even point. It was verified by the none other than Nvidia CFO Kollet Cress as for them this decline meant the loss of at least a hundred million dollars straight away.

Impact

 The best part is the implications followed by the mining business shutdown. If the current free fall of Bitcoin is to be continued then it is an open secret that mining will become even lesser profitable phenomenon. It will lead to more such shutdown activities by individuals as well as mining Giants. This process will discourage the frequency of transaction over the network thus making the already lethargic Bitcoin’s network even slower. At one point, the user will be frustrated to the core and start finding the alternative solutions. It will give rise to a phase of a Mass selloff. If this persisted for some months then there are very strong chances that the haters Paradise will become true someday and that is the death of Bitcoin.

Difficulty Adjustment

The algorithm on which the whole Bitcoin network runs is designed to adjust itself automatically but there is a sense of insecurity at this point. There is a new term doing the rounds on the twitter named ‘Death Spiral’ that will disrupt this algorithm. But thankfully, the hash rate must have to fall abruptly by the time the Bitcoin network can adjust its difficulty level. Also, in the last week of the may the another Bitcoin Halving is proposed so the experts have a different opinion on this whole propaganda.

 Who Will Run the show in such Grave hours?

 There are miners who are staunch bitcoin believers and will work even in such prospects (up to the level when the Bitcoin mining becomes a loss-making deal). But before that with the cost of their equipment, they will keep their machine running up. In such a scenario, the point of deflection will be an overall negative ROI instead of any instant ‘No profit No Loss’ occurrence. Additionally, the new entrants may find it as a good opportunity (if they are ready to hedge against the BTC downtrend pattern.)

 The true Costs

 If some experts like Arun Balaji to be believed then the cost the analysts come up with are inflated in nature and do not represent the original estimations associated with the bitcoin mining firm business. So, even if according to analysts they continue this to their break-even point, they will still remain profitable in the truest sense as mining costs are lesser in reality (not falsely portrayed by some analysts).
Apart from all these issues, there is also one very important point that we should not miss here. Here one can be duly noted and that is the cost of electricity. It is one of the very important factors that affect the whole Bitcoin mining firm business prospects. It is important to know here that the electricity provided to these mining Giants are subsidized in nature but recently several governments around the world started cutting subsidies thus making the mining costs even higher.

A ray of Hope

The road from here is definitely not upbeat in prospects of profitability but there are still hopes left. There are expectations of Bitcoin recovery period in less than 12 months (from now- January 2019) if the experts and trade analyst to be believed. So, the way is brighter for medium to longer terms but for short term, it is definitely sufficient to give the individual miners – Mini heart attacks.
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