The COVID-19 crisis had a direct impact on the price of Bitcoin and the distribution of ASIC equipment. F2pool believes that Bitcoin miners were unprepared for the halving.
A seemingly endless pandemic, tragedies everywhere, and much political-social instability have made 2020 a tough year. These elements have plagued the global economy at levels hard to estimate. This situation has involved industries that global events have not traditionally touched, such as Bitcoin mining.
This year, miners of this cryptocurrency have faced challenges like never before. They have not only had to experience firsthand the consequences of the coronavirus, but they also had to prepare for a difficult year within this market. The Bitcoin third halving accompanied the pandemic and there has been an increasingly competitive ASIC manufacturing ecosystem. There, new and old companies struggle to assert the dominance of their mining equipment.
Mining pool F2pool recently published a report that demonstrates the negative effects of the current year on the mining industry on more than one occasion. However, the landscape by the end of the third quarter of 2020 is not as worrisome as it initially seemed. Companies and private miners have managed to overcome, to a greater or lesser extent, the most shocking events. However, a new wave of infections could change the picture.
Pandemic Has Complicated Bitcoin Mining
From mid-February, the world stopped until it entered a strict quarantine. Without the freedom to move and with coronavirus cases doubling every day, the economy stalled. The day when the WHO declared that a pandemic was hitting the world, markets collapsed and the fateful Black Thursday occurred.
Everyone will remember that night when the price of Bitcoin fell by 50%, reaching a low of USD 3,800. The market for this cryptocurrency had already had several lows in 2020, due to market speculation. However, this drop was unprecedented regarding the previous ones, since it was full of panic and uncertainty.
The markets of gold, crude oil, and the S&P 500 index also experienced effects similar to those of Bitcoin. The report by F2pool states that this unusual situation in global markets demonstrated that “the demand for means of survival for the society is more significant than having a safe-haven asset.” People hurried to convert into cash their savings to solve their needs while they could, in a scenario that the media portrayed as apocalyptic.
There was a price correction soon after, but miners felt the hard knocks of the fall anyway. Twenty-three percent of Bitcoin’s hashrate fell immediately with this market crash, that is, a large proportion of miners decided to disconnect their equipment or migrate to other networks until further notice. With a price of USD 3,800 per BTC, the ASIC equipment that was working to cover operating costs at that time was not profitable enough.
In addition to the bearish trend in the market, the quarantine that the WHO imposed to stop the spread of the coronavirus further complicated the picture. The Bitcoin mining ecosystem had been preparing since last year for the third halving of this cryptocurrency, buying more powerful devices and conditioning the old ones. However, due to mobility restrictions, Bitmain S19 and MicroBT M30 equipment arrived late.
The delay further limited Bitcoin miners, who were already with their hands tied regarding the upcoming halving. With the decrease in the price of Bitcoin and a block reward of just 6.5 BTC, many miners had to stop working until the difficulty underwent readjustment or the profitability conditions improved.
In the report, F2pool suggests that the ecosystem was unprepared for the new era of Bitcoin. When the halving occurred in early May, the second post-halving block took 40 minutes to mine (which normally takes 10 minutes) and in the first 24 hours, there was a removal of only 137 blocks (which is usually 144 on average).
Although people expected a decrease in Bitcoin’s hashrate after the event, the behavior of the network indicated that there was even less. This may be because the most powerful ASIC devices on the market have not yet been incorporated due to logistics problems that the pandemic has caused.
By Alexander Salazar
