China's Crypto Crackdown Floods Market With Used Mining Rigs

(Bloomberg) -- China’s crackdown on Bitcoin miners has prompted a flood of second-hand equipment onto the market, easing a global bottleneck for the servers used to generate the coins, North American crypto miners say.

"There are thousands of servers that are on their way to our data center as a result of what’s been happening there," said Sean Walsh, chief executive officer of Hyperblock Technologies Corp., which owns a 20-megawatt mining farm near Spokane, Washington that being expanded to as much as 100 megawatts.

China dominates Bitcoin mining. Three of the top pools where members combine their processing power and split the rewards are Chinese and alone account for more than half of the global hashrate, according to blockchain.info, an bitcoin-data aggregator. Yet in recent months, Chinese authorities have clamped down on the crypto industry, banning initial coin offerings, halting virtual currency trading, and announcing plans to have miners exit the business.

"I’ve had different Chinese groups show up at my office saying, ‘Hey, we want to get 50,000 machines out of China,’" Dan Reitzik, chief executive officer of DMG Blockchain Solutions Inc., a crypto miner based in Canada, said in a phone interview. "A lot of these guys that have invested millions and millions of dollars are looking to get their machines out of the country."

As the price of Bitcoin surged last year, demand for mining rigs spiraled prompting order delays in a sector with a limited pool of suppliers. China’s Bitmain Technologies is the dominant manufacturer of the application specific integrated circuits, or ASICs, used to mine for Bitcoin.

"The lead times on new servers are almost irrelevant now because you can buy servers used from guys that are getting shut down or pushed out of the market place," said Walsh, whose company is the wholesale provider of hashrate -- processing power -- to Bitcoin.com, one of the larger mining pools outside China.

"The secondary market for Bitmain’s Antminer S9s, for example, is exploding as we sit here today," said Walsh, who was speaking at a Canaccord Genuity Group Inc. blockchain conference in Vancouver this week.

To contact the reporter on this story: Natalie Obiko Pearson in Vancouver at npearson7@bloomberg.net.

To contact the editor responsible for this story: David Scanlan at dscanlan@bloomberg.net.

©2018 Bloomberg L.P.