China has always had the upper hand when it comes to bitcoin mining. The country hosts two of the largest distributors and builders of mining equipment in Bitmain and Canaan Creative. However, as of late there appears to be a national chip shortage, which means China may be losing its edge when it comes to extracting new crypto units.
China Is Starting to Lose Its Edge
Right now, the prices of mining machines and related equipment have surged like there’s no tomorrow in China given how rare mining chips have become. Many analysts believe that this could allow China’s competitors to potentially ease forward on the financial ladder and that this could give them time to catch up and close the mining gap they’ve been witnessing all these years.
Alex Ao – vice president of Innosilicon, a chip designer and provider of mining tools – explained in a recent statement:
There are not enough chips to support the production of mining rigs.
As it stands, the chip shortage is so bad it’s not just mining that’s being affected. Ao claims that there aren’t enough chips right now to satisfy the current production rates of products such as laptop computers, vehicles or cellular phones.
Many traders and analysts believe that with bitcoin’s price rising like mad as of late (in early January, it hit a new all-time high of $40,000 per unit), everybody has just been putting all their money into the bitcoin sector. This has caused many miners to up the ante and work harder to extract new coins. It has also empowered several new miners to join the arena, which explains why chip suppliers cannot keep up with present demand levels.
Gordon Chen – co-founder of cryptocurrency asset manager and miner GMR – explains:
When gold prices jump, you need more shovels. When milk prices rise, you want more cows.
Naturally, with the spikes that bitcoin has been enduring lately, miners need more machines.
People Will Pay Whatever Prices Are Necessary
Lei Tong – managing director of financial services at Babel Finance – says that many providers of mining rigs are doing just about all they can to get their fingers on top-notch equipment, and they’re willing to pay high prices for said equipment. That’s how desperate they’ve become in recent weeks. Tong says:
Almost all major miners are scouring the market for rigs, and they are willing to pay high prices for secondhand machines. Purchase volumes from North America have been huge, squeezing supply in China.
At the time of writing, the website for Bitmain – one of China’s top bitcoin mining equipment providers – shows much of the company’s items as being sold out or in extremely limited supply, and some are convinced that the rarity of the equipment, combined with the high prices miners are now witnessing, will likely cause several smaller mining operations to fall apart in the coming weeks.