Discounted Crypto Mining ASIC Demand in Russia Skyrockets

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Demand for dis­count­ed ASIC cryp­to min­ing equip­ment saw a mas­sive boost in Rus­sia in Q4, and the country’s cheap elec­tric­i­ty rates played a crit­i­cal role. Nonethe­less, the glob­al out­look for min­ers is still grim.

Many regions across the globe have had a prob­lem­at­ic rela­tion­ship with cryp­tocur­ren­cies, espe­cial­ly Bit­coin and its min­ing oper­a­tions. While many coun­tries raised red flags over Bit­coin trans­ac­tions, some key events have shown the need for decentralization

One exam­ple is the unfor­tu­nate con­flict between Rus­sia and Ukraine. 

Russia-Ukraine War Impacts on Bitcoin

The largest cryp­tocur­ren­cy wit­nessed a 16% jump in March 2022 as the Russ­ian assault on Ukraine con­tin­ued, and the U.S. ratch­eted up sanctions.

Bitcoin prices witnessed a sharp rebound around the Feb-March period
Source: BeIn­Cryp­to Price

Katie Talati, the direc­tor of research at Arca, an invest­ment firm, aired her thoughts regard­ing the ongo­ing war and its poten­tial effects on Bitcoin: 

Source: YouTube

“Dig­i­tal assets like Bit­coin are kind of an inflec­tion point, Bit­coin was designed to do what it’s meant to be a ‘non-sov­er­eign’ asset. A way for cit­i­zens in coun­tries that have unsta­ble gov­ern­ments or unsta­ble economies to put their mon­ey in some­thing unre­lat­ed to their economy.”

Bit­coin trad­ing has been sig­nif­i­cant in Rus­sia, as wit­nessed by the Ruble (RUB)-Bitcoin (BTC) trade pair. Met­rics record­ed by the cryp­to ana­lyt­ics provider Kaiko indi­cat­ed that Ruble (RUB)-denominated Bit­coin vol­ume reached close to 1.5 bil­lion rubles around that period.

Ruble-denominated bitcoin volumes surge as the Russian currency hits record low
Source: Kaiko 

This indi­cat­ed that many Russ­ian cit­i­zens were poten­tial­ly seek­ing ways to exit their country’s fiat cur­ren­cy for oth­er assets. This was direct­ly after Rus­sia was hit with finan­cial sanc­tions from the U.S., U.K., and some EU nations. 

Crackdown on crypto assets

Fast for­ward to the present, and we can see that cryp­to assets have suf­fered sig­nif­i­cant­ly. Bit­coin is trad­ing around the $17,000 lev­el, mark­ing a 75% drop from its all-time high of $69,000 in Novem­ber 2021. 

Jaran Mellerud, a Bit­coin min­ing expert at Vir­di Funds, gave rea­sons behind its strug­gles in 2022. In a newslet­ter, he stat­ed:

“Due to the tight­en­ing mon­e­tary pol­i­cy, 2022 has been a tough year for most finan­cial assets. Bit­coin has been high­ly cor­re­lat­ed with the Nas­daq since mid-2020, albeit with sig­nif­i­cant­ly high­er volatil­i­ty. With Nas­daq down 29% year-to-date, it is no sur­prise that bit­coin has strug­gled this year.”

Bitcoin price fall as compared to Nasdaq
Source: Viri­di Funds

This was rem­i­nis­cent of China’s motion to ban cryp­to min­ing. Chi­na once held the major­i­ty of min­ing hash pow­er across the globe until 2021, as seen in the plot below: 

Distribution of Bitcoin mining hash rate from September 2019 to January 2022 by country
Source: Sta­tista

The large elec­tric­i­ty require­ment of these min­ing oper­a­tions was a key rea­son behind its crackdown. 

By now, prac­ti­cal­ly all Bit­coin min­ing oper­a­tions are no longer prof­itable as the BTC price con­tin­ues to fade and elec­tric­i­ty costs rise. This caused a rip­ple effect on the hash rate and the sale of min­ing equipment. 

ASIC (appli­ca­tion-spe­cif­ic inte­grat­ed cir­cuit) min­er prices have fall­en by around 80% this past year.

Crypto Mining Operations in Russia

Rus­sia has had a sto­ried past with its reg­u­la­tion of cryptocurrencies. 

As hash pow­er left Chi­nese shores, oth­er nations emerged as hot des­ti­na­tions for Bit­coin min­ing oper­a­tions — includ­ing Russia

In ear­ly 2021, a Russ­ian min­er import­ed 20,000 Bit­coin min­ing rigs into the coun­try, the most sig­nif­i­cant import of its kind. After China’s ban on min­ing, the Russ­ian Asso­ci­a­tion of Cryp­toe­co­nom­ics, Arti­fi­cial Intel­li­gence and Blockchain (RACIB), local author­i­ties, and busi­ness­es worked togeth­er to entice Chi­nese min­ers to the region. 

At present, the cur­rent down­trend in the prices of ASIC min­ers is like­ly to con­tin­ue in the near term. Russ­ian min­ers are tak­ing full advan­tage of the low prices, per the lat­est insights shared with BeInCrypto. 

Rise in demand 

Kom­m­er­sant high­light­ed the rise in a Dec.1 report

“In the fourth quar­ter, the demand for spe­cial­ized com­put­ing devices for cryp­tocur­ren­cy min­ing increased sig­nif­i­cant­ly in the Russ­ian Fed­er­a­tion. It is spurred by low equip­ment prices against the back­ground of low­er quo­ta­tions, as well as the still low cost of electricity.”

‘The sup­ply of cheap used equip­ment may even increase in the future against the back­ground of the with­draw­al from the mar­ket of large for­eign min­ing com­pa­nies,’ it concluded. 

Data from Glob­alPetrol­Prices show­cased that ‘the price of elec­tric­i­ty is 0.079 U.S. Dol­lar per kWh for house­holds and 0.114 USD per kWh for busi­ness­es which includes all com­po­nents of the elec­tric­i­ty bill such as the cost of pow­er, dis­tri­b­u­tion, and taxes. 

For com­par­i­son, the aver­age price of elec­tric­i­ty in the world for that peri­od is 0.143 USD per kWh for house­holds and 0.138 USD per kWh for businesses:

Russia’s electricity prices as compared to the average cost of electricity in the world
Source: GlobalPetrolPrices.com

Crypto Mining Operators in the Region 

Dif­fer­ent min­ing oper­a­tors based in Rus­sia echoed the same nar­ra­tive regard­ing the increased trac­tion shared with BeIn­Cryp­to. Bitriv­er, one of Russia’s largest min­ing oper­a­tors, claimed that ‘in the first ten months of 2022, the demand for min­ers grew by 1.5 times.’

Mean­while, min­ing hard­ware retail­er Chilkoot stat­ed that sales in the first two months of Q4 exceed­ed those for the entire third quar­ter. The ‘total for the pre­vi­ous nine months of 2022 was 65% high­er than last year’s volume.’ 

“We work with legal enti­ties, and they began to buy 30% more equip­ment per trans­ac­tion than at the begin­ning of the year,” not­ed Artem Eremin, Chilkoot’s devel­op­ment manager. 

With Bit­coin trad­ing in the range of $16,000–$17,000, Russ­ian min­ing firms still have some mar­gin of safe­ty, not­ed 51ASIC co-founder Mikhail Brezhnev. 

Over­all, this shows that demand for ASIC machines has increased significantly. 

Concerns to consider

So, while min­ing oper­a­tions have increased in some regions, there is still a con­tentious nar­ra­tive on a glob­al scale. Min­ers are sell­ing at the most aggres­sive rate in almost sev­en years, with a 400% increase in sell­ing pressure. 

The present mar­ket con­di­tions reflect a prob­lem­at­ic posi­tion for min­ers. Ris­ing ener­gy costs, high min­ing hash rates, and declin­ing BTC val­ue have exac­er­bat­ed these issues. 

A per­fect storm of a falling Bit­coin price, grow­ing com­pe­ti­tion among min­ers, and increas­ing elec­tric­i­ty prices have paved the way for poten­tial­ly the worst bear mar­ket in regard to Bit­coin mining.

Disclaimer

All the infor­ma­tion con­tained on our web­site is pub­lished in good faith and for gen­er­al infor­ma­tion pur­pos­es only. Any action the read­er takes upon the infor­ma­tion found on our web­site is strict­ly at their own risk.



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