China Crackdown: ASIC Miner Prices Likely to Rise As Others Expect Short Term Impact on Crypto Market

Prices of application-specific integrated circuit (ASIC) miners are not likely to stop rising all through next year, says Luxor Mining, which provides analysis, data, and hashrate insights.

Its analysis of what the crackdown means for ASIC manufacturing in China stems from what they say is China’s most severe crypto crackdown yet and should not be taken lightly.

It comes as some in the space share that the recent China declaration of crypto-related transactions as illegal will not have a long-term impact on the market.

 

China’s crackdown an additional pressure

According to Gregory Klumov, CEO of stablecoin platform Statis, China’s “harsh position”, as manifested in its decision to clamp down on crypto transactions within its borders, won’t affect the market in the long run. 

Rather, he sees the move as an “additional pressure on the market” through the “tightening of requirements for its participants by the Chinese regulator”. He adds that it only triggered a sharp drop in tokens from Chinese exchanges as well as a sell-off on a wide range of digital assets, including blue chips such as Bitcoin and Ethereum.

It could be recalled that exchanges with Chinese roots such as Huobi and OKEx announced the termination of the registration of customers from China shortly after the news broke that crypto transactions have been declared illegal in the country.

“China’s harsh position in the long term does not affect the cryptocurrency markets,” Klumov said. “Digital assets will continue to integrate into the financial system, and also become an increasingly popular sector for the allocation of assets among large investors and institutions – but outside the Middle Kingdom.”

He added that the digital asset integration is causing “a persistent interest in third-generation networks that do not have a Chinese footprint” like Avalanche or Cosmos. 

 

Bitmain’s shift out of China crucial to ASIC prices

Nonetheless, while Klumov’s outlook of a short-term effect on the crypto market is in terms of digital asset use, Luxor Mining is focused on the mining ban. Its analysis suggests that Bitmain will likely stop producing in China and may have to shift manufacturing capacity to its Malaysian and Indonesian facilities. 

Bitmain is considered to be on top among the most popular brands of ASIC miners as a specialised Bitcoin mining hardware housed in thermally-controlled data centres with access to cheap power. 

If it happens that Bitmain stops producing in China, the piece says the shift will “send bigger wrinkles through the already-severely-ruffled ASIC supply chain, disrupted as it has been by chip shortages and constipated shipping logistics.” 

It should be noted that prior to the Chinese government’s recent announcement, the year has seen prices of ASICs rise owing to several factors. According to Compass Mining’s Zack Voell, the most efficient ASICs have jumped over 25% since the start of Q3 2021. He cites the direction of Bitcoin prices as a factor pushing ASIC prices. 

With the expectation of Bitmain shutting down its manufacturing plants in China, the Luxor Mining piece suggests that ASIC miners should be expected to be more expensive with time. It says next year is looking like a “hold my beer” moment for higher prices if the shutdown happens.

Publication date: 
10/02/2021 - 02:34
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