July 22, 2024

Cryptocurrency mining industry in 2019 – events and trends

Cryptocurrency mining industry in 2019 - events and trends

Incredible growth in Bitcoin hashrate, concentration of mining power in China, industry first IPOa large company and entering the public sphere of conflict between the co-founders of Bitmain. These and other events of the year influenced the industry, changing its appearance. Let's remember how this happened.

Historical Bitcoin Hash Maximum

Sustainable Bitcoin network hash growthlasted for almost the entire year. In October, the figure hit a historic high of 114.3 TH / s. Then, the hashrate decreased slightly, but overall over the year it more than doubled from 40 TH / s to 90 TH / s.

Cryptocurrency mining industry in 2019 - events and trends


This growth was facilitated by the launch of an increasing number of ASIC devices for bitcoin mining and the replacement of older models with more efficient ones.

But, according to research expertsdivision of Binance, not all miners rationally used the growing capacity. For example, analysts could not find a reasonable explanation for why some of them mined Bitcoin SV (BSV) over the course of the year instead of the more profitable Bitcoin, losing $13 million.

Over-the-top Bitcoins

It seems that it was the rapid increase in computing speed that led to an interesting phenomenon - the extraction of “above-standard bitcoins” by miners.

According to the first cryptocurrency algorithm, 52 560 blocks can be mined in 365 days, however, they were mined by almost two thousand more or more than $ 100 million per year.

The concentration of mining power in China

According to a study by CoinShares, the shareof Chinese miners in hashrate in 2019 grew to 65% - the highest level in the two years during which it has been monitoring. At the same time, 54% of computing power is located in Sichuan province.

31% of the remaining hashrate falls on:

  • US states of Washington and New York;
  • Canadian provinces of British Columbia, Alberta, Quebec, Newfoundland and Labrador;
  • Iceland
  • Russian Siberia;
  • Norway
  • Sweden
  • Georgia
  • Iran.

Another 4% generate capacity located in other jurisdictions.

Cryptocurrency mining industry in 2019 - events and trends


However, the trend of the year was the development of large mining projects outside of China, primarily in the United States.

An alternative to mining in China

Bitmain has built a 50 MW mining center in Rockdale, Texas, with plans to expand to 300 MW.

In the same area, a much more ambitious project is being implemented by the German firm Northern Bitcoin - a 1 GW mining farm with an area of ​​57 football fields.

Worth mentioning is Crusoe Energy Systems,which has developed mobile installations for mining Bitcoin using the energy of associated gas in US shale oil fields. Crusoe already operates eight such units with a capacity of 1 MW each. Investors, including the notorious Winklevoss twins, believed in the company's technology - it raised $70 million in funding to deploy 70 installations.

Rearrangements in the market shares of producers of ASIC miners

In the first half of 2019 CanaanCreative increased its market share to 22% while perennial leader Bitmain reduced it to 65%. For comparison, two years ago these figures were 6% and 75%, respectively. The third Chinese mining giant, Ebang, also increased its “market pie” during this period - from 5% to 8%.

But the results of the year that will become knownlater, serious adjustments can be made to this picture. According to Chinese media reports, in October, with the traditional end of the rainy season in Sichuan, miners began upgrading their equipment to more efficient ones.

According to sources among sellers of ASIC miners, up to 50% of purchased devices come from MicroBT's flagship models, while Bitmain's Antminer installations account for about 16.7%.

It's easy to believe when you look at the rating.profitability of Bitcoin miners from F2Pool. The list is topped by the Whatsminer M30S from MicroBT, and there are four models from the company in the top ten—the same number as Bitmain.

Cryptocurrency mining industry in 2019 - events and trends


As local media, created again, believeMicroBT's problems in the market have led to Bitmain's renewed prosecution of the company's founder and former lead developer Yang Zuoxing.

The first IPO of a major industry representative

After unsuccessful attempts by Chinese mining giants to go public for an IPO in Hong Kong this year, messages began to appear about their plans to conduct an initial public offering outside of China.

The intention of Canaan Creative to conduct an IPO in the United States became known at the beginning of the year, in the summer - about a similar goal of Bitmain.

Canaan filed a filing with the Securities and Exchange Commission (SEC) in October. The company had planned to raise $400 million, but in a re-filing it lowered its requests to $90-110 million.

In November, Canaan became a “pioneer” among the largest miners, posting 10 million US depositary receipts at a price of $ 9 apiece on NASDAQ.

The set lower limit of $90 million was met, but less than a month after the start of trading, the company's shares fell by 40%.

However, Canaan is confident that being a public company will allow the firm to gain credibility in business circles and attract investors. Her goal is to remove Bitmain from the throne next year.

But the leader does not intend to give up his position:Following the return of Jihan Wu to leadership, Bitmain announced initiatives that should promote sales of ASIC miners and lower barriers to entry into the Bitcoin mining market. The firm has also filed for an IPO in the US backed by German financial conglomerate Deutsche Bank.

Conflict of Bitmain founders and other problems of mining companies

About the confrontation between the co-founders of Bitmainbecame known last year. At the end of October this year, Jihan Wu returned to the position of CEO of the company, removing Mikri Zhang with the support of shareholders. According to Wu, the conflict has been going on for several years, and under Zhang's leadership, the company almost came to disaster.

But the latter did not give up the idea of ​​returningcontrol of the company and promised “war.” It is unlikely that his unsuccessful attempt to regain control of the company through a shareholders meeting in November was his last action in this direction.

At the same time, in the fall, it became known that Chinese courts blocked more than $ 1 million of the company's assets in claims by suppliers.

Bitmain is not the only one facing legal actionpersecution for unfulfilled obligations - a similar lawsuit was filed against Ebang. Phantoms of financial problems in the second half of 2018 continue to haunt industry leaders.

With them they will enter 2020, where the mainThe expected event will be the Bitcoin halving. The impact of block reward halving on cryptocurrency prices and mining is hotly debated. Some experts are confident that this will lead to an increase in the price of Bitcoin, while others believe that halving has already been taken into account.

In any case, miners will need more efficient and powerful equipment, which opens up opportunities for manufacturers and will inevitably lead to a redistribution of the market.

How to mine bitcoins for an ordinary user / investor in 2020?

For ordinary investors (conditionally with investments up to $ 100,000), the most profitable and affordable option for bitcoin mining is still cloud mining service contracts.

Cloud mining &#8212; this is a mining modelcryptocurrency based on the fact that mining equipment is rented from a contractor. It happens like this: the company buys equipment for mining, pays for maintenance, electricity, Internet - and investors buy a contract for power (hashrate) and receive the cryptocurrency mined by this equipment.

A detailed overview of cloud services with a current rating at the end of 2019 can be found here.