Miner prices fluctuate more than currency prices? Two things to understand before understanding the trend

Original: Wang Tao

Source: Vernacular Blockchain

Mining machine is a magical existence. As a single-function computing device, why sometimes its price has nothing to do with cost, but changes constantly with the price of a certain commodity? In the huge industry landscape, why is it the first listed company out of the blockchain industry?

To answer these questions, we need to re-understand the mining machine from the two main lines of electronic products and financial products, and understand the secrets behind this business.

01Miner from the life cycle of electronic products

First of all, aside from all the exciting Slogan, the miner is essentially an industrialized, mass-produced electronic product. It must be emphasized that miners are not Bitcoin, and Bitcoin is not a miner.

The smart phone is the most familiar and the biggest change in the electronics industry.

At the beginning of 2010, the smartphone has just started, and the industry has entered an exploratory period. Many early players in the smartphone industry have entered the market.

Then there is the long growth period. Every once in a while, the memory, display and CPU of the smartphone are rapidly pushed up. In those years, it was normal to change the phone once a year, because smartphones have evolved too fast. That is the rapid growth of smartphones. The bonus of the industry has brought rapid growth opportunities for players in the field.

Now, the smartphone industry has loomed to maturity. The competition pattern in the industry is also becoming clearer, and the smart phone industry has become increasingly mature. If you think about it, you will find that the mobile phone you use now is not significantly different from the mobile phone two years ago.

This is the embodiment of the product life cycle curve in the smart phone industry, which is relatively intuitive for most of us, and the situation of desktop computers and notebook computers is very similar.

After the product is mature enough, industry players can only increase the sales premium through after-sales or corner innovation to maintain industry profits. Compared with the early stage, industry profits will be greatly diluted during the mature period. In other words, the dilution of the profits of the electronics industry is a doomed process.

In the final analysis, due to limited industrial technological progress and irreversible productivity, capital will continue to reduce the average cost of production to the extreme. In other words, this is an arbitrage behavior that runs through the entire product cycle. Industry pioneers pay the courage and cost to gain an arbitrage advantage that is one or two years ahead, and continue to arbitrage until the model is drained.

Speaking of mining machines, Yang Zuoxing, founder of Shenma Mining Machinery, said at the mining conference in September this year:

The era of halving the power consumption of each generation of mining machines is gone, and the maximum reduction in power consumption of each generation of mining machines can only reach 10% to 20% in the future. The service time of mining machines in the future will be extended to 4.5 years. Power-consuming miners will become more and more popular.

In essence, this indicates that the mining machine, as an electronic product, has entered a mature period, approaching the current production limit of human physical science, and the era of brutal growth has passed.

In ten years, when an industry can give birth to a listed company, this is a sign of industry maturity. Under the technological advancement of the industry, the industry has entered a mature period of multiple bulls. Many mining machinery companies will start sharing this market. The industry will never return to the highlight moment when Bitmain ruled the market in 2017. At that time, things were simple. In a sentence-"Stupid, the biggest problem is supply and demand. "

For the miner manufacturers, it will be a long battle in the future, and every number on the financial statements will be the result of hard work until the product life cycle is completed. Return to cartel or monopoly. Without any electronic product, there can still be a practically accessible barrier to entry after popularization, and capital will smooth the final arbitrage space.

Ma Yun said: Today is cruel, tomorrow is even more cruel, and the day after tomorrow is beautiful, but most people die tomorrow night and cannot see the day after tomorrow.

But perhaps the real cruel thing is the day after tomorrow, because then the story is over.

02 Understanding Miners from Financial Attributes

You may find that the price of the mining machine will constantly change according to the price of the underlying digital asset. This is often a difficult question to explain: Why, as a low liquidity mining machine, the price fluctuations are often greater than the currency price fluctuations? As an electronic product carrying computing power, how do you understand this phenomenon financially?

The answer is: Mining machine is actually the largest financial derivative of various digital assets.

The calculation of the mining machine's equity is relatively complicated. The root cause of the complexity is that the mining machine itself outputs cryptocurrency, so when the mining machine is priced, it will inevitably reflect the risk of fluctuations in the price of the cryptocurrency.

So far, the computing power of Bitcoin is shown in the figure below. It is in a state of continuous rise, and it is almost an exponential increase.

When the base of fiat currency is not introduced, if a single mining machine is priced in the output of the cryptocurrency, it is the currency that each Hash Rate can be divided into, which is approximately equal to the "current number of coins produced / total Hash Rate", and the result is bound to be close to exponential decay. .

With the introduction of fiat currency quotes, the relationship between miners and fiat currency output has become extremely complicated. In simple terms, due to the linear output and attenuation characteristics of the miner, when the currency price is high, it is similar to a discounted daily delivery of multiple locked positions; when the currency price is low and the mining cost line is below, the miner is similar to An ill valued long option.

Therefore, selling miners is selling attenuated discount orders, and this attenuation ratio is determined by the production capacity of the miner manufacturer. The stronger the production capacity, the more severe the attenuation. The largest long order in this industry is actually tied to the mining machine, which can explain why the miners and the coin hoarding party have the most wealth in the industry so far.

Mining companies have also explicitly ignored the issue of mining, so another question to consider is: when mining machine manufacturers can rely on mining to obtain excess returns, why should they sell mining machines outside? After all, compared to the production of mining machines, there is actually no high threshold for mining.

In short, when a large number of mining machines are put on the market, this represents the profit-taking behavior of mining machine operators, because the mining machines are actually priced according to derivatives. And the miners who receive the goods often bear a hidden situation and bet against the miner. Of course, at present, the monopoly of miners has not formed, but it has entered a relatively vicious competition situation. People also have reasons to believe that the behavior of miners to manipulate the market will become increasingly difficult.

03 Dilemma of the Mining Machine Game

The so-called halving market appeared after the previous two Bitcoin halvings. Naturally, the market also has expectations for this upcoming Bitcoin halving in the first half of 2020. According to statistics from some people, in 2019 alone, excluding futures, the actual mining machine transaction may reach more than 20 billion yuan. All of these funds will enter the mining machine maker and upstream industries, and there will be no penny entering the market value of Bitcoin.

Miners use a large amount of funds to purchase mining machines, and these purchased funds include a large amount of financial leverage. Everyone wants to benefit from Bit halving and hopes that the halving once every four years will pay for a lot of leverage. This is a pretty scary game.

Can the bets of the miners work as expected? We will wait and see.

Message mining : Do you think the fluctuation of the price of mining machines will affect the price of coins? why? Welcome to share your views in the message area.


"Disclaimer : This article is the author's independent opinion, does not represent the vernacular blockchain position, nor does it constitute any investment opinions or suggestions. The copyright of the article and the final interpretation right belong to the vernacular blockchain. A