According to recent reports, the ASIC mining giant and crypto mine operator Bitmain is currently caught in a downward spiral that could lead to dire consequences for the company. Information available suggests that Bitmain has been firing up to 50% of its staff, laying off an army of Bitcoin Cash developers, and shutting down some of their mining operations. An unconfirmed report from Chinese language media sources even suggests that the current CEO is likely to step down as a result of the chaos. Join us as we go over what appears to be the fall of Bitmain, or at least, the devastating state that the company is in now.
Giant No More
For the last few years, Bitmain has been the undisputed king of both ASIC mining hardware and running massive bitcoin, Litecoin, Bitcoin Cash, and potentially other cryptocurrency mining operations. It’s difficult to say because Bitmain is in many ways a highly secretive company. As far as interacting with the general public, Bitmain was most well-known for their Antminer series of ASIC devices.
During the peak period of late 2017, Bitmain mining devices were frequently sold out, and as a result, sold for double or triple the retail price at various reselling websites. Today, however, as crypto asset prices continue to remain flat and, with mining profitability at an all-time low, Antminer devices such as the newest S11 are currently being sold for just $525. According to mining calculator coinwarz.com, mining bitcoin with an Antminer S11 and paying $0.10 per kilowatt for power would mean that it would require 2,161 days or almost 6 years to break even. Of course, this assumes that difficulty doesn’t change which it inevitably will. But based on today’s numbers, the outlook does not look good for Bitmain devices.
An Investment Gone Wrong
One of the reasons why Bitmain could be suffering financially is that they allegedly made huge investments into Bitcoin Cash. This includes hiring a development staff to support the currency, as well as dedicating mining resources towards Bitcoin Cash instead of BTC.
In early January 2018, Bitcoin Cash was trading for around $2400 each. Today it is trading for well under $200 with its lowest point being about $79 in the middle of December 2018. While effectively all cryptocurrencies have dropped massively since January, Bitcoin Cash seems to have suffered to an unusually high degree. As such, any investments made by Bitmain into Bitcoin Cash have likely resulted in a near-total loss.
As a consequence, reports are saying that Bitmain has completely wiped out its Bitcoin Cash development staff including individuals that were hired just days before. This suggests that upper management may have just decided to wipe out the department without informing those in charge of hiring.
CEOs to Step Down?
There is an unconfirmed report that appeared in the Chinese language media source Odaily which claims that the current two CEOs of Bitmain are very likely to step down from their positions and be replaced. The report further suggests that the two CEOs will be replaced by someone with the surname Wang.
Remember, this report is currently unconfirmed and the current CEOs have thus far refrained from making any comments regarding the allegations. In fact, CEO Jihan Wu has not Tweeted since December 2 of this year, only re-tweeting two comments since then, the last of which was nearly 2 weeks ago. This by itself does not necessarily mean anything, but the fact that Wu has not denied the allegations is something to consider.
A World Without Bitmain
Bitmain currently is still an actively functioning company. They are still accepting orders for mining hardware, and quite likely still have some mining hardware running at one or more of their locations in or outside of China.
But let’s go out on a limb and ask ourselves, what would a world without Bitmain look like?
If the company does cease operations at some point in the future, it could have a massive effect on all cryptocurrencies in general. First, one of the biggest suppliers of ASIC miners would cease to exist, which could have a significant impact on the supply of these devices on the market and their market price.
Secondly, if all of Bitmain’s mining operations were to shut down, this would have a considerable impact on many cryptocurrencies, particularly Litecoin and Bitcoin Cash in addition to the obvious bitcoin. The sudden and sharp reduction in hash rate could expose smaller networks to 51% attacks if other miners don’t come in and pick up the slack on the network.
On the other hand, if Bitmain pulls out and hash rates drop, this will also, in turn, reduce the difficulty and could incentivize more individual and small-scale miners to come back into the fold.
Bitmain is not the only company that makes ASIC miners. Several other contenders have come into play, and there’s even a strong possibility that Intel could get involved in the mining industry somehow, but we are not sure currently what form or shape that would come in.
The bottom line is this – a world without Bitmain would be a very different one from the world we are in today. It’s entirely possible that this is just a bump in the road for the company and things will pick up in the next few months. This is especially true if crypto asset prices start to increase steadily. Or it’s possible that this is just the beginning, and Bitmain is now on a decline that it cannot recover from. For now, only time will tell.