David Kan. Picture: FINANCIAL MAIL
David Kan. Picture: FINANCIAL MAIL

Following the selloff of bitcoin and other digital coins, demand for cryptocurrency mining equipment has tapered off in SA, sales data suggest.

"I can confirm that all mining product sales are under pressure. Sales volumes are less than 50% from the previous month," Mustek CEO David Kan told Business Day.

Mustek, an assembler and distributor of information technology products, said in February it was struggling to keep abreast of strong demand for cryptocurrency mining equipment in SA. It had seen a "phenomenal rise" in graphics processing unit (GPU) sales owing to "intense interest in cryptocurrency mining by the public".

Cryptocurrency mining is the process whereby transactions are added to the public ledger and the method through which new bitcoins, ethereum and other digital currencies are released into the market.

In these places, electricity is extremely cheap and you don’t really need cooling.

"Two weeks ago, we got an allocation of 500 GPU units [from a supplier]. Within 20 minutes, all 500 were sold. The demand is certainly there," Kan said in late February.

However, with the cryptocurrency bubble having burst at the end of 2017 and early 2018, reduced prices appear to be weighing on demand.

The price of the flagship digital currency, bitcoin, has fallen from a high of R254,670 in the middle of December to about R100,000 at the end of last week, according to data from local exchange Luno.

That will do little to promote large-scale cryptocurrency mining, which is a highly energy-intensive process, in SA.

Commercial mining has not taken off in the country.

Lex van Wyk, CEO of data centre operator Teraco, said the costs to mine bitcoin had grown and mining in SA was less viable than in countries such as Tibet and Iceland.

"In these places, electricity is extremely cheap and you don’t really need cooling because you just open the windows…. It’s all about getting the lowest cost."

It was unlikely that any of Teraco’s customers were mining bitcoins within the company’s data centres, Van Wyk said.

In February, the Washington Post reported that Iceland’s cryptocurrency mining industry had started using more electricity than Icelanders’ own private energy consumption.

Companies had inundated Iceland with requests to open new data centres to mine cryptocurrencies, which was adding pressure on the national electricity grid, the US newspaper reported.