Russia’s market for specialized crypto mining equipment has been seeing high demand over the past couple of months, with buyers attracted by the low price tags. Russian experts also predict an increase in the supply of used coin minting hardware as large foreign companies leave the industry.

Russian Demand for Powerful ASIC Miners Skyrockets in Q4, Report Reveals

Demand for powerful computing devices designed to mint bitcoin has surged in Russia during the fourth quarter of the year, spurred by their low prices amid declining crypto markets, the Russian business daily Kommersant reported. The country’s cheap electricity rates and expectations for a higher supply of second-hand miners have played a role as well.

The positive trend in the market for ASIC (application-specific integrated circuit) miners, used to extract bitcoin, has been observed despite a recent decrease in demand for graphics processing units (GPUs), or video cards employed to validate transactions for other cryptocurrencies, experts from the industry told the newspaper.

The sales of mining hardware retailer Chilkoot in the first two months of Q4 exceeded those for the entire third quarter. And the total for the previous nine months of 2022 was 65% higher than last year’s volume. The daily also quoted Bitriver, one of Russia’s largest mining operators, which said that in the first 10 months of this year the demand for miners grew by 1.5 times.

“We work with legal entities and they began to buy 30% more equipment per transaction than at the beginning of the year,” noted Artem Eremin, Chilkoot’s development manager. He added that the prices of GPUs started falling in the second half of September and are still declining, citing Ethereum’s transition from proof-of-work to proof-of-stake mining as a major reason.

If before The Merge video cards were bought by miners in huge quantities, now demand comes mostly from gamers, acknowledged Roman Kaufman, co-founder of Berezka DAO and Weezi. The crypto entrepreneur confirmed that ASICs are now gaining “huge popularity” in the Russian Federation.

Depressed Prices of New and Used Equipment to Benefit Big Mining Companies in Russia

Industrial mining enterprises in Russia can take advantage of the current market conditions, said Bitriver’s Financial Analyst Vladislav Antonov, who also pointed out that the increase in demand is due to decrease in wholesale prices. The cost of mining hardware decreased by almost 20% between August and October, he revealed.

Russia’s relatively low electricity rates, compared to many other regions in the world, is another factor supporting demand for crypto miners, according to Terracrypto’s founder Nikita Vassev.

Despite the low valuations in the crypto market, with bitcoin (BTC) hovering in the range of $16,000 – $17,000, Russian mining firms still have some margin of safety, noted 51ASIC co-founder Mikhail Brezhnev. When using the latest models of coin minting machines to mine at just $0.07 per 1 kWh, the production cost of 1 bitcoin is around $11,000.

The picture could improve further for crypto mining businesses in Russia due to the expected influx of used mining equipment. As Brezhnev explained, many mining companies, mainly foreign-based and financed by borrowed capital or clients, have failed to optimize their activities and may go out of business amid the current bear market. He believes their mining machines will most likely be bought in bulk by others who want to enter the industry.

The comments of the experts interviewed by Kommersant come after earlier reports revealed a significant growth in revenue and electricity consumption in Russia’s mining sector over a period of several years. However, this year’s crypto winter and sanctions imposed in response to Moscow’s invasion of Ukraine hurt crypto miners in Russia and some foreign investors have already pulled out of the country.