facepalm

It’s 15 days into 2018, and the crypto market has already been rocked, shaken, poke, prodded, and pretty much lost it’s sh-t as a series of punches have hit the crypto markets very hard. Bitcoin is down about a third since it’s peak, and news from China and Korea have everyone and their dog more than a little skittish.

China is first. There is a bit of confusion, but it seems that between local and national governments, there is a bit of a push to get coin mining out of the country. This comes on the heels of ICOs and coin exchanges pretty much getting the boot. The interesting thing is how they are approaching this, in first part it’s going to be pressure by cutting back on the electricity available, possibly by cancelling preferential deals or major discounts, and then second is a more slow and determined push to track down and ease large scale mining operations out of the country. The Chinese government will track down all of the current miners, make it harder for them to get power, make it harder for them to access their buildings or otherwise impede their operations, and generally make it desirable to leave.

The upshot here is that a big percentage of the total mining setups out there are in Asia. Weaning them off of cheap (or almost free) power and forcing them out of the country will drive up the costs of mining. It could in many ways make mining either less profitable or not profitable at all, which may drive some to change their operations or to stop entirely. It will be interesting to watch the overall total hashrate in place over the next couple of months to see.

The second live grenade tossed into the crypto market was a statement from a South Korean government official that crypto exchanges might be banned in the country. Since Korea’s market generally trades at a sizable premium to the rest of the market (near 30%, some report), the effects were instant. Prices dropped, sellers entered the marekt, and pretty much all crypt currencies were driven down.

Pretty much every day brings negative news. What it’s doing, more than anything, is squeezing on mining. Hashflare as an example raised their 1 TH/s from $140 to $150 and then to $220. At $140, the return was about 60 days. With increased difficulty and falling coin price, the break even (based on today’s results) is about 140 days. At $220 per TH/s of hashrate, that brings it up to 220 to 230 days. If the rate of increase of difficulty continues and the price even stays stable, it’s very likely that the break even for 1 TH/s will be longer than the contract (365 days). So for someone like me who is trying to eek out a margin in mining, it’s not a good sign at all.

For me, the best thing that could happen is a sudden decrease in the amount of mining going on. That would decrease the difficulty, and would in turn improve the returns for those of us who remain mining. But at this point, there seems to be almost a suicidal run to the wall of more and more processing power being put against diminished returns. That was okay when the price of coin was going up faster than most could think, but with all of the run up for the last few months evaporated, it’s not likely to pan out for them easily.