BTC halving and mining industry restructing bring new opportunities for new entrants
Since its inception, Bitcoin has experienced halving for two times. On November 28, 2012, the block rewards were halved and adjusted for the first time. Then in November 2013, investors have embraced the Bitcoin bull market and the BTC price soared to $1000 USD. On July 9, 2016, Bitcoin has welcomed its second halving. On December 17, 2017, Bitcoin has reached $19783.06, highest point in history.
#1. Is the Bitcoin actually manipulated?
Bitcoin is a decentralized global market, the institutions or large funds can affect the short-term trend for at most a month, no one is able to affect BTC’s long-term trend.
To be honest, I believe that the central banks are manipulating the Bitcoin. If the central banks did not print money like crazy, the Bitcoin might not appear.
The Bitcoin whitepaper was released during the subprime mortgage crisis in 2008, countries across the world were printing money like crazy at that time. A message found in the genesis block read thus: “ The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”.
What is bailout? The means the central banks printed money out of nowhere, recently, the Fed also doubled its balance sheet from $3 trillion to $ 6 trillion amid the COVID-19 crisis. Banknotes can be printed out of nowhere, but money is not wealth, printing money does not increase wealth. Printing money simply depreciates fiat currency and increase the price of the assets.
The U.S Fed was established in 1913, and the dollar has depreciated by 96% from the beginning, not to mention other fiat currencies.
Someone may ask, Bitcoin price has increased a lot, from a few cents to thousands of dollars, if everyone made money, so who lost? The answer is the people who hold the paper money.
The central banks print banknotes and steals wealth from all banknote’s holders, this is called Monetary Seigniorage. The U.S Fed issues more US dollars, which is equivalent to collect monetary seigniorage from the people all over the world.
In the past, the right to currency release was monopolized by the government, after the emergence of Bitcoin, the governments found a competitor. Now a small portion of people have chosen Bitcoin, which has led to an increase in the number of Bitcoin users and its market cap.
We firmly believe that the fiat currency system with no anchors that keeping printing money is not sustainable. Bitcoin will definitely achieve a great development in the future, Bitcoin can scale up to the same magnitude of fiat money or at least its market value can be as much as gold. Gold now has a total market value of 7 trillion US dollars, divided by 21 million bitcoins, which is 2 million RMB.
#2. From two mining machines to hundreds of thousands of machines, can your road to success be replicated?
For most people, the biggest problem with buying Bitcoin is that they have little money to invest. In fact, the capital is not a problem. At the end of 2013, I bought 2 Graphics Card miners with 30,000 RMB ($4300), and I did not invest any more funds afterwards. In the most ideal case, if your investment doubles every 200 days, these two miners could become thousands until now, instead of 200,000 machines.
How did I get there? I borrowed money to mine. In theory, ultimately, we want to have more coins, so borrowing money to buy coins is more straightforward but there are also problems.
Others will not easily lend you money to buy coins, because most people don’t know what bitcoin is, while borrowing money to mine crypto is easier for them to understand, Bitcoin mining mimics the gold mining, and mining machines are viewed as legal assets which generate cashflow on a daily basis, if you repay the loans regularly, you will gain the trust of lenders.
Indeed, apart from borrowing money to mine crypto, you can also collaborate with the lenders, and share the benefits with a certain proportion.
The most important thing is holding the coins until their price to rise ten times or dozens of times, your debt in RMB will basically depreciate to zero. You only need to sell a small quantity of coins to pay down debts. Therefore, the best strategy is to adopt the Even Total Payments , even if the interest rate is higher, when the bullish market comes, there might be several times of benefits difference.
In addition, compared to the holding, mining has another advantage, that is, it can resist the bear and sideways markets. If all you accumulate your coins only through buying on the Exchanges, if the crypto price dos not increase or even decreases, you will feel overwhelming psychological pressure and you cannot hold the crypto.
There was a classic example during the last bullish market, we call it “480K brother”. In 2014, when the BTC price decreased from 8000 RMB to 4800 RMB, he bought 100 BTC with the money he saved for an apartment, 480 K RMB in total, so we call him “480K brother”. Then, the Bitcoin price fee from 4800 RMB to 900 RMB, the market has been freezing around 1500 RMB throughout the whole year 2015. In the beginning of 2016, the BTC price increased from 1500 RMB to higher than 3000 RMB, he finally sold all his BTC at 3600 RMB. It is a pity that he missed the bullish market afterwards, when the price was 130,000 RMB.
Even in a bear market, mining machines are able to continually mine coins; on top of that, few people want to buy mining machines because of the bearish market, the mining difficulty will not rise, so that the mining machines slowly reach break-even point and collect low-cost coins. When the bullish market come back, these machines will generate more profits for their owners.
Mining is less risky than buying coins, and of course there are corresponding disadvantages, your profit will be lesser than holding during the bull market. In the last round of the bull market, if someone holds the coin from the bottom to the peak, that means from 200 USD to 20,000 USD, he could earn 100 times the profit. While for the mining, plus the profit repurchasing the mining machine, the ROI is about 20 to 30 times. The advantage of mining is that the risk is much lower than directly buying coins, especially for the S19 antminer, which consumers less power. Even if the coin price is cut by half, the other machines would be forced to shut down causing the decrease in difficulty while the S19 will continue to mine and reduce the costs. It takes only a few months to bring the S19’s cost below the production cost, you would be absolutely safe.
#3. How much money do I need to get started the mining?
Mining requires a relatively large amount of capital. If you want to directly intervene in mining, you must buy at least 1000 ~ 2000 mining machines in order to have the scale advantage of operation. Based on the current situation, one less expensive machine will cost you 5000 RMB to 10,000 RMB, therefore you need at least 10 million RMB before jumping in this business. This has not taken into account other investments such as mining farm construction, for example, building a 50,000 Kw mining farm requires another 20 million investment.
Mining business is now specialized. An ordinary people want to buy mining machines with thousands of dollars, not only is there no major customer price, but the freight rates are expensive and shipment is slow. Compared to our air freight + special truck shipment, it will be extremely time consuming. Generally, most of the mining farms declined to host for a couple of mining machines. As a result, it is hard to directly get into the mining business for ordinary people.
Some people may choose the cloud mining products. Cloud mining products are relatively problematic. On the one hand, they are basically 30% to 60% higher compared to the mining machine according to the price by Th/s. For example, the price per Th/s of antminer S19 for major customer is 161 RMB, and this price would be 200 to 250 RMB, or just sells it to you for a short period of time. The S19 is expected to miner for 3 to 5 years, if we multiply this price by several times, then it becomes more expensive. There are also a lot of pitfalls when it comes to cloud mining, unreliable platforms can be found everywhere.
In theory, the mining business has the highest efficiency. Major miners like us can buy thousands of mining machines at a time and put them in our own facilities. We have own professional team to undertake the operation and maintenance, which is not only efficient and safe, but also allows us to avoid pitfalls. There are many pitfalls for small miners and the major miners have very obvious scale advantage.
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