Since the beginning of the year, there has been an unprecedented demand for cryptocurrencies. As investors pile up cryptocurrencies in large quantities, miners are also toiling day and night to produce more and meet the ever-increasing demand.
Miners are now ever ready to purchase any accessible machines on the market. Secondary miners are also taking advantage of the primary miners’ low inventory, with transactions rising to their 2017 high. Currently, the crisis seems to have shifted to rig makers leading to a shortage of inventory.
Rig makers experiencing scarcity
Last week, a newspaper report that makers of Bitcoin mining hardware are now confronted with a serious shortage of inventory as miners had started to upscale their production to meet the asset’s rising demand. The report noted that Bitmain is already out of stock and will only stock up by August this year.
Apart from the shortage in inventory, the price of rigs is now on the high side. According to the industry price tracker, you would get a unit of Bitmain’s flagship Antminer s19 for $1900 Nov. Last year. At the moment, the same product goes for $4770. Hence, one needs to cough up extra cash to pay at a 45% premium to get the device, which will be out of stock until December.
The ongoing shortage hitting rig makers, particularly, Bitmain is attributed mostly to rig miners’ upscaling in the United States. In December last year, a mining firm, Marathon patent Group bought 70k rigs from Bitmain for $170 million. This has added to the over 10k rigs that the company purchased two months earlier. Apart from Marathon, which is based in Nevada, Riot Blockchain also purchased 15k rigs. Although Bitmain raised its prices to reduce the increasing demand caused by the explosion in Bitcoin’s price, miners still pre-bought three months of stock in less than a month.
The Rich Investors are largely responsible for the shortage of the inventory
Apart from the two firms mentioned above, many others are demanding additional mining rigs in their bid to boost their production to meet the ever-increasing demand for Bitcoin. Retail investors are now the ones bearing the brunt of the scarcity caused by the institutional investors. A recent report noted that liquid Bitcoin wallets lost 270k BTC in January as against 175k in December. This indicates a consistent drop in the fluid supply of Bitcoin in the last nine months.
The rate at which institutional investors join the crypto market in droves signals the wide acceptance of Bitcoin as a reliable investment alternative and a store of value. However, the problem lies in the fact that the big investors prefer to hold the digital currencies instead of doing something with them. This has reduced the ability of day traders to have access to sufficient Bitcoins to trade with.
Bitmain is reported to be continuously improving its production capacity and efficiency to meet the increasing demand. The company is also expecting the surge to weaken any moment because more and more institutions are now entering the market.