Even though leading bitcoin mining manufacturer Bitmain doubled prices to capitalize on overwhelming demand resulting from the surge in the price of bitcoin, it still pre-sold three months of inventory in a few weeks.
In late November, Bitmain’s Antminer S19 was priced at $1,897. Now, the same machine sells for $3,769, a 98% markup.
Bitmain’s prices have gone up, said Kevin Zhang, vice president of business development for New York-based mining company Foundry, noting that demand for new ASICs shows no sign of abating soon. “But there also has been very limited extra allocation for May though July next year for S19s and S19 Pro models.”
With miners eager to buy any available machines, secondary mining markets continue to benefit from primary manufacturers’ low inventory, with activity surging to its highest levels since 2017. Prices for more efficient, second-hand models have climbed to 12-month highs, per Luxor Technologies market data.
“Secondary markets are also booming”, said Amanda Fabiano, head of mining at Galaxy Digital. “S9s that were being sold in May 2019 for $20 are now being sold at $130 on some channels,” she told CoinDesk in an email.
The surge in mining activity comes as bitcoin ended 2020 with a more than 300% gain, currently trading just below $31,000. Miner revenue has also soared, with the dollar amount earned per terahash per second (TH/s) reaching $0.25 Sunday, its highest level since August 2019, per data from Luxor.
To meet growing market demand, Bitmain has “been enhancing the efficiency and capabilities of our manufacturing facilities,” said International Marketing Director Nathaniel Yu.
But Yu doesn’t expect demand for mining machines to subside anytime soon as “more institutional investors take interest in cryptocurrencies and blockchain technology.”
Fabiano described the current mining machine market conditions as a “perfect storm” for supply constraints: limited capacity at the foundries, larger facilities buying up supply and companies with strong balance sheets entering the market with the ability to place massive orders.
Those massive orders are coming from mining firms like Riot Blockchain (RIOT)https://hashrateindex.com/stocks/riot, which bought over 31,000 new machines this year; Core Scientific, which bought 59,000 machines from Bitmain in one order, and Marathon Patent Group (MARA)https://hashrateindex.com/stocks/mara which expanded its mining fleet to over 100,000 machines.
“At this rate, hardware procurement will continue to be an obstacle throughout 2021,” Fabiano said.
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