Report: Bitmain to Launch 200,000 Crypto Mining Rigs in China

According to a report published by CoinDesk on Mazar. 21, cryptocurrency mining conglomerate Bitmain is looking to launch up to 200,000 new mining rigs in China, at a conservatively estimated cost of $80 million.

The move will allow Bitmain to take advantage of the relatively cheap hydroelectric power in China during the summer of 2019, with CoinDesk also reporting that the expensive deployment of equipment may end up being more cost-effective for the company than outright selling their inventory. CoinDesk also reports that the decision by CoinDesk is positive for the industry and miners, sending a signal of a “broader shift in the market, with miners preparing to invest again following last year’s contraction in capacity.”

Bitmain, which holds the distinction of being the largest manufacturer of cryptocurrency mining equipment by market share, can take advantage of the excess hydropower in China’s southwestern province for cheap mining costs relative to the broader market. According to sources in the region familiar with the situation, Bitmain has “already started discussions and making deals with farms to host its equipment so that it can be fully prepared.”

The report also includes information that Bitmain will be primarily deploying its newer model mining rigs, the AntMiner S11 and S15, which retail for around $500 and $1000, respectively, per unit. It is also unclear according to the sources which proof-of-work cryptocurrency Bitmain will be targeting to mine for. As CoinDesk points out, even at $80 million in projected costs to deploy the equipment in the new region, the move represents a “non-negotiable opportunity cost” considering Bitmain’s primary revenue source is from mining equipment sales as opposed to actual mining.

However, the company is caught in a difficult position due to the ongoing bear market that has extended into the beginning of 2019. While the company could attempt to selloff the bulk of their 200,000 intended units for deployment, the marginal profits that could be made from mining in the presence of cheaper electricity may provide the better sunk cost. CoinDesk calculates that, using conservative estimates, Bitmain may be able to secure a monthly profit of $7.7 million.

CoinDesk also reports that Bitmain’s scaling up in mining operations could send a strong signal to the broader market, particularly as cryptocurrency mining and coins prices continue to linger at relative lows. Estimated reports found that over 600,000 Bitcoin miners shut down operation in 2018 due to the falling con prices no longer proving profitable relative to mining costs, leading to the market being flooded with second-hand rigs being sold at a discount.

Despite the decline, Bitmain and other miners deploying to China in the upcoming wet season to take advantage of excess hydroelectric power could bring about a sharp increase in Bitcoin’s hash rate, with some estimates putting it at 70 quintillion hashes per second (EH/s), well above the all time network high of 60 EH/s.

Renewed mining interest in conjunction with building crypto adoption that has already started in 2019 could lead to a reversal in both coin prices and increased competition to capitalize on the market while prices are still depressed. With increased mining competition for Bitcoin, the selling price for newly minted coins should also rise, which could have a broader effect on BTC pricing.

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