Why the Mining Rigs’ Price Jumped Up?

After the closure of many mining farms in China, many cryptocurrency mining equipment have entered the market. This led to a sharp decline in mining rig prices. However, rigs have now risen in price due to the recent bullish rise in Bitcoin.

Over the past few weeks, Bitcoin has seen one of the biggest gains this year. Therefore, it should come as no surprise that mining machine manufacturers such as Bitmain and MicroBT allow their customers to pre-order rigs and hold futures contracts for shipments of machines that will be delivered on a predetermined date in the future.

In the futures and spot markets, mining machine prices have already jumped. This may indicate the optimistic expectations of miners regarding the price of the largest cryptocurrency, according to industry professionals.

According to Franky Hu, director of business development at MyRig, when mining rig futures are sold at a much higher price than the current price, miners are betting on higher Bitcoin prices, resulting in broader profits.

Rig prices in the secondary spot market appear to have bottomed out in July and have risen for three straight weeks since then. Prices for various mining machines rose an average of 7.5% last week, the largest jump since the recovery, according to the rig price index of Seattle-based mining company Luxor.

The price of rigs is determined not only by the cost of the equipment itself but also by the expected profitability, driven by the market sentiment regarding the price of the Bitcoins these machines can mine.

But there is also a huge market for used mining rigs that has a price arbitrage mechanism. It allows brokers to take into account the price of Bitcoin depending on how much the rig can be sold for.

Every morning at 11 a.m. in Beijing, brokers in China update mining machine prices and relay this information to brokers in North America. This daily update allows miners and brokers in China to reflect the price of Bitcoins in the prices of their mining rigs in a matter of hours.

And while it may take only a few hours for these rigs to rise in price, it usually takes two to three weeks for them to fall after the Bitcoin price plunge, giving sellers plenty of time to adjust their prices.

However, the risk of owning mining rigs still exists because machines depreciate as they tend to deteriorate over time and miners can lose money sitting on piles of machines in a warehouse if they cannot find a place to operate them.

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