An Avalon Bitcoin mining machine. (Internet photo)
A BTC craze is sweeping China, as hundreds start to invest and trade large amounts of the virtual currency Bitcoin. The craze has given birth to a huge industrial chain, covering trading, mining, chip production and mining-machine assembly.
Tencent, China's largest internet company by value, said that the currend demand for Bitcoin can be regarded as a type of futures investment involving the growth forecast of BTC's value and mutual bets on credit standing between upstream and downstream players. The major risk for the BTC investments lies in whether the currency can be embraced by even more people and become a standard online currency. While the company added that the new currency's lucrative outlook is attracting the participation of a growing number of savvy investors.
Yang Yaojun, former founder of a university campus website, became a convert of the Bitcoin currency or BTC one month ago, when he set up the website asicme.com to explore BTC business. He was inspired by the success of Zhang Shenpeng, a BTC enthusiast, who posted an announcement of advanced sales on May 22, selling 1 million yuan (US$163,000) worth of BTC-denominated products in just two days.
Bitcoin transactions are secured by servers called bitcoin miners but based on the huge surge in demand for the currency, Bitcoin mining machines are in short supply. In many cases, miners do not give a specific delivery schedule for the currency, forcing buyers to wait a long time to receive their investment.
According to Tencent, there are two Chinese mining teams capable of processing large amounts of Bitcoin transactions. One team, dubbed friedcat, boasts the largest mined amount of Bitcoin worldwide, able to mine over 200,000 yuan (US$32,600) worth of BTC assets in one day. The other team, dubbed Avalon, sells mining machines capable of mining 100,000 yuan (US$16,300) worth of BTC in one month. The price of a secondhand Avalon mining machine has recently soared to 200,000-300,000 yuan (US$32,600-US$49,000).
Since a mining machine derives profits mainly from producing chips, Avalon has switched its focus to the sales of its ASIC chips. Up to now, Avalon has fulfilled its pledge of delivering its chips in a nine to 10 week period after receiving orders, winning the trust of buyers. Since April when the team first started to receive orders, it has sold than 100 million yuan (US$32.6 million) worth of chips.
Figures show that China now boasts the most number of BTC nodes, which help control the computing power of the Bitcoin netweek, at 85,220. Tencent said that credit is vital for BTC operations, including its trading platform, investment, mining, chip production, and assembly of mining machines. Initially, BTC was designed to become the main cybercurrency but the viability of the online credit system now hinges on whether it can cement its position in cyberspace. While insiders said that its value must be fixed, with no one institution able to randomly increase their supply of the currency.
Bitcoin is currently accepted in trade by merchants and individuals in many parts of the world and it is not regulated by the government. However, many are less optimistic about the future of the currency, questioning its stainability and constant fluctuations.