Opinion Bitmain commences one of the biggest deployment of Crypto Mining Rigs

Bitmain commences one of the biggest deployment of Crypto Mining Rigs

March 23, 2019

Bitmain, the biggest manufacturers of mining rigs according to its market share is elevating its capacity. This is taking place before the start of the drop in Chinese electricity costs that will take place in the summer. A group of Chinese mining operators in the southwestern provinces is familiar with the company’s plan. According to them, the Beijing company will deploy around 200,000 rigs of its mining gear to the same area. The purpose is to use the big advantage of the low cost of electricity that will be produced in the summer months by the hydroelectric plants in the region.

The raining season will not arrive in this part of China, which includes Yunnan and Sichuan, before May. But, in spite of this, Bitmain is already working on deals with individual farms and discussing options with others to host their gear so that they can be fully prepared.

The news of the rainy season and the price of energy started some weeks ago in the crypto scene. Now, with massive investment by Bitmain, there seems to me a lot more to the story than a possibility for a quick crypto profit.

Huge Rig Deployment

The company will supposedly mainly use its new products. These include AntMiner S11 as well as S15, with some of the older models including AntMiner S9i/j also in the planning. Also, many pointed out that the latest models for mining, including S11 and S15, as well as T15, are all listed as sold on the company’s online shop. Also, while the info on the rig deployment is clear, there is no inside information about which cryptocurrency will the miners be used for.

All of this is a substantial investment and follow-up operation for a company that primarily sells rigs rather than use them. The S11 and S9j sell for about $450 and the number deployed would be worth around $90 million on the market. The S15, which are not included in this, cost about $1,000 each. Clearly, the company is not just determined to sell its inventory but also use it. This means that the potential for a profit is clearly so high that they are willing to expand their focus.

The necessity of a Bear Market

In the current market, the notion of self-mining might not be as odd as it might sound. This, in particular, includes the S series – using them makes more sense than trying to offload them in a slow buyer market. According to the index tracker of the f2pool mining pool, a rig from the S9j, S11, and S15 can generate a profit of about $0.9, $1.8 and $2.8 respectively. This is a calculation for the rigs that are used to mine bitcoin at its current price and based on the electricity cost of $0.05 per kilowatt hour.

No one can say what precise deal will Bitmain get when it begins mining, but the operators of the farms expected that the price of the kilowatt hour is going to be just under $0.04. This means that the previously mentioned Bitmain rigs would be able to churn out a daily profit of about $1.3, $2.2 while the S15 would get about $3.4. This is an excellent profit margin. Even if all of the 200,000 mining rigs that Bitmain employs are S9j, the capacity would be able to bring about $7 million in monthly profits. The company is not choosing to discuss its plans with the media, but they are also not denying them.

Changing Mining Opportunities

The scaling up of the Bitmain mining operation shows a big change in the market for crypto rigs. In 2018, when the full brunt of the crypto market slump was evident, over 600,000 mining rigs had been shut down at some point. This brought about a huge jump in the presence of the second-hand mining gear that was being sold at big discounts, especially rigs like AntMiner S9. Within the Bitmain company, the self-mining division was also undergoing changes in that period.

Again, there is no precise data on the number of miner rigs that were taken offline but the numbers of its hash rate suggest it was substantial. Now, however, the setup is about to change. With the price of power as low as $0.037 per kilowatt hour, the possibility of mining with great profit margins is back at the table. In digital ventures, like in esports and other dynamic fields, speed is often essential and presently, it seems that Bitmain will be investing a lot of resources into the mining chance that will open up in the summer months.

Playing it Smart

While it seems that the profits for Bitmain and other ventures that are ready for the exploitation of low electricity cost in the summer is certain, many questions remain. First of all, the summer months will pass and the electricity will rise in price even in these Chinese provinces. Furthermore, the entire calculation resides on the bitcoin keeping its current price of about $4,000. An additional factor is the difficulty of the mining inside of a network, either bitcoin or some other cryptocurrency.

Finally, the fact remains that these rigs will be labeled as used ones once Bitmain puts them back on the market. This will further take away from the profit that selling the rigs could have made if they were brand new. But, through all of this, there is a single connecting thread – Bitmain and others like they are trying to play it smart in an exceedingly long and exceedingly hard bear market.

The bitcoins that are mined can be held by the company until the price swings up and the profits are elevated as well. So far, it has been making a net loss as a company, but it has the backing of investors who want to see it become one of the dominant crypto industry forces. All this maneuverings is likely designed to keep the ship afloat until the prices skyrocket once more. If they never do, both playing it smart and playing it dumb will not make a big difference in the end.