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Secondary Mining Markets Surge Amid ASIC Manufacturing Delays

Miners are “scrambling” for any available machines as manufacturers stay sold out.

Dec 8, 2020 at 5:22 p.m. UTC
Updated Sep 14, 2021 at 10:39 a.m. UTC

Secondary markets for bitcoin mining machines are red-hot as a surge in demand from miners has caused severe delays in order fulfillment from manufacturers.

Two of the mining industry’s largest manufacturers, Bitmain and MicroBT, are sold out of new machines until May 2021 as demand has overrun current manufacturing capacity. Scrambling for even more machines, miners are turning to secondary markets for whatever they can find. 

Bitmain’s international marketing director, Nathaniel Yu, confirmed that the company is sold out of inventory until May 2021 in an email to CoinDesk. Bitcoin’s 166% year-to-date rally is a “key driver” of surging demand for new machines, especially for Bitmain’s 19 Series, Yu said. 

Vincent Zhang, vice president of sales for Bitmain’s leading competitor, MicroBT, declined to comment on his firm’s current inventory but noted that demand for efficient mining machines is high. 

“When the price ran up, everyone gobbled up orders,” said Kevin Zhang, vice president of business development for New York-based mining company Foundry, referring to bitcoin’s strong recovery off of a 50% intraday price crash in March. 

Producing enough new machines to meet demand is especially challenging because of the competition for mining chips, Zhang said. (His company is a subsidiary of Digital Currency Group, which is also the parent company of CoinDesk.)

The same 7 and 8 nanometer chips that miner manufacturers need are also in high demand by other technology giants like Apple and Nvidia. When competing for supply against these firms, bitcoin mining companies are generally a lower-priority customer.

Unable to receive new machines from manufacturers battling supply-line complications, miners are swarming to secondary markets. 

Trading activity on these otherwise much quieter markets is at or even above pre-halving levels, according to data approximations from Guzmán Pintos, co-founder of mining software company Luxor Technologies. Before the third bitcoin halving event in May, the mining subsidy was twice its current size, allowing for a larger pool of profitable market participants.

An even starker imbalance between supply and demand was drawn by Thomas Heller, chief operations officer at mining software company HASHR8, in a direct message with CoinDesk. Heller said secondary markets for mining hardware are the hottest they’ve been since late 2017 or early 2018 during the cryptocurrency market's last peak. 

“Nobody wants to sell. Everyone wants to buy,” Pintos told CoinDesk.

Strong demand for any available machines is reflected in the high volatility and premiums of ASIC prices. For some machines, the per-unit price can “easily change 10-20% on a weekly basis," Pintos said. 

It’s not uncommon for the upward volatility of second-hand mining machines to often exceed bitcoin’s volatility, Heller added. 

In recent months, prices for second-hand, lower generation mining machines have increased upwards of 40%-50%, according to Mason Jappa, CEO of Blockware Solutions, one of the leading mining hardware and service providers. Newer machines like the S19 Pro have seen more mild price increases of around 25% on secondary markets. 

With Bitmain and MicroBT sold out through May 2021, Jappa said, the mining hardware market has been transformed into “truly a seller’s market at this point.”

Aggregate weekly pricing estimates for ASIC miners on secondary markets

Blockware expects the current trend of strong demand and limited supply to intensify with more and more miners “scrambling to purchase machines on the secondary market with as quick as a timeline for delivery as possible,” Jappa said.

Mining conditions – not to mention the bitcoin price itself – are “very bullish at the moment,” he told CoinDesk. According to Jappa, timelines for future batches of machines from Bitmain and MicroBT will continue to be extended, and prices on secondary markets will continue to appreciate. 

UPDATE (Dec. 9, 04:10 UTC): Added disclosure of Foundry's common ownership with CoinDesk to the sixth paragraph.

DISCLOSURE

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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