Did Bitmain Lose Out on Mining Profits Due to Overproduction of ASIC Mining Rigs?
As is common knowledge by now, mining giant Bitmain incurred massive financial losses all through 2018— thereby severely affecting not only the price Bitcoin but also reducing the overall clout of the mining industry.
In regards to the issue, popular BTC analyst and miner, James McAvity, recently took to Twitter to show how Bitmain’s “overproduction of ASIC miners” lead to the firm losing out on massive profits.
Hashrate follows price.
In response to high mining profitability, ASICs were overproduced & over-consumed. Now Bitcoin mining electricity usage (assuming 75 watts/TH) is ~$4,000,000 day, up from ~$250,000 at the start of 2017.
— James McAvity (@jamesmcavity) March 19, 2019
During the latter half of 2017, the Bitcoin market touched its apex— with the price of a single coin scaling up to a monumental price point of USD $20,000.
As a result of this, Bitmain sped up the production of its famed, top of the line, ASIC mining rigs— which at one point were staples within the industry. However, these devices eventually became more and more difficult for the company to offload, since their demand decreased exponentially within a span of just a few months during 2018.
At the same time, McAvity also highlighted a clear increase in Bitcoin mining’s electricity usage between 2017 and 2019. According to his research, he found that during the first few months of 2017, the sector’s overall electricity consumption lay around the USD $250,000 per day mark— a figure, which as per the graph presented below, later increased to a staggering $4,000,000 a day.
More On The Matter
Many of our readers might already be aware that Bitmain previously controlled a massive chunk of Bitcoin’s hash rate. However, the past 6-8 months have seen the firm take a series of decisions that have seriously reduced its dominance within this otherwise burgeoning domain.
Additionally, if certain industry insiders are to be believed, Bitmain’s executive brass has already sold off most of their crypto holdings so as to survive the crypto winter that has engulfed the coin market since the start of last year.
In regards to the matter, McAvity added:
“BITMAIN is the gift that keeps on giving. Not only did they (in)voluntarily give up their position as the leading mining manufacturer, fostering greater decentralization.. but they also flooded the market with ASICs, sentencing their customers to waning profitability.”
In rounding off this piece, it should be pointed out that a whole host of Bitcoin enthusiasts are of the belief that BTC’s price drop from $6,400 to around $3,000 last November, was due to the reallocation of the flagship cryptocoin’s “hash power” by Bitmain.
“I predict we would drop to 20mm TH/s if the halving happens today, cutting network-wide miner electrical OPEX by 60%.”