Some forward-looking bitcoin miners in China have been stocking up second-hand mining rigs these days, prepared for the cheap electricity promised by the upcoming wet season in Sichuan.

Sichuan, a mountainous province in southwestern China, is home to numerous bitcoin miners for its abundant and cheap hydroelectric energy. Rumor has it that 70% of the currently available hashing power directed at bitcoin stems from China, among which 70% comes from Sichuan.

Last July, Sichuan floods have sparked turmoil in the crypto mining space considering its impact on the bitcoin hashrate. What happens in Sichuan, the so-called “bitcoin mining capital of China”, seems to matter a lot in the hashrate world.

After suffering from the floods, bitcoin miners there were then tortured by the dry season (starting from November). It forces up hydroelectricity costs and leaves bitcoin mining unprofitable amid the red chaos of the crypto market. Some even sold their mining rigs by the kilo to end all this.

While this tragedy seems to come to an end soon as the raining season expected to come in April draws near. The 1,419 rivers in the region will soon wake up to propel the roar of 3,267 hydro plants. Numerous bitcoin mines will revive as they could have cheaper and sufficient power supply.

In the period of high water, the cost of electricity in Sichuan can be as low as 0.08 yuan ($0.01), while the electricity cost of thermal power in dry season is 0.28 yuan ($0.04). The difference between the two is more than three times.

Lost 40 million yuan

“The top 10 bitcoin mines in the country have generally lost more than $10 million in 2018.”

A miner with the pseudonym of Liang Chen told us. Liang said he runs an online gaming company in Beijing, in late 2017 he was fascinated by the digital gold rush and became a bitcoin mine operator after buying 5,000 units of Antminer S9 at the price of 15,000 yuan ($2,200) per unit.

His illusion was soon shattered by the slump of bitcoin price over the past year.

“It takes over 30 years to earn my costs back based on the current profit – an S9 can only make 1 yuan a day calculated by the current bitcoin price.” “I’ve lost 40 million in this game.”

To quit or move on, this is the question miners like Liang have to face.

Be greedy when others are fearful

One of Warren Buffett’s most famous investment saying – “Be greedy when others are fearful” – best fits miner Song Li, who is busy collecting second-hand mining rigs.

“I’m preparing for the upcoming wet season,” Song said.

According to him, wet season in Sichuan usually begins in April every year, and hydropower is most abundant from May to October. In the rainy season, the price of hydropower electricity is only about 0.1 yuan ($0.014).

Is electricity really so important for bitcoin mining? Taking Antminer S9 for example, its hashrate is 14TH/S, power consumption at 1356W, and 4% fee charge to mining pool. Assuming that the difficulty of mining remains unchanged, there is a serious negative correlation between the electricity charge and the mining revenue. Every 1 percentage point increase in electricity charge will cause the mining revenue to reduce by 15%. When the electric charge reaches 0.42 yuan /kWh, all mining effort will be in vain.

That’s why miners are scratching their heads in search of cheap electricity, some even at the risk of mining in Iran where electricity is said cheap as 0.03 yuan/KWH, that’s one third the price of the cheapest hydropower in China.

“A second-hand mining rig only costs me 800 yuan ($118), which could be paid back in three months calculated by the electricity cost at 0.1 yuan in wet season.”

While this is assumed with other factors like mining difficulty, bitcoin price, cost of mining rigs unchanged, the reality might not go as it is perfectly wished, given too much uncertainty exists in the crypto mining space.

Some have quitted and some just joined the game before the wet season arrives. Will the high water in the next months in Sichuan bring miners back to life? Leave your comment below.