Crypto mining is one of the key aspects of the crypto space, and a driving force of blockchain technology. However, due to the bear market and other problems which the industry faced in 2018, a significant lack of popularity of this particular industry was noticed. Not only that, but even the existing miners decided to abandon mining farms and find some other way of making a profit through digital currencies.
GMO Loses $320 Million
According to last year’s reports, Japanese internet conglomerate, GMO, experienced huge losses in the last quarter of 2018. The loss was not expected, and the company itself admitted as much. As a result, they had to leave the mining business which they originally entered only several months earlier, in June.
At the time, the company wanted to become a competitor to the largest crypto mining firm in the world, Bitmain. They used 10% of their own resources and capital to start the mining business, after obtaining advanced technology and developing methods which would ensure lower power consumption. However, this was not enough, as the company did not fully consider the actual size of Bitmain operation.
At the time, Bitmain was seeking a valuation of more than $15 billion, while GMO valued at only 10% of that amount. Bitmain itself, on the other hand, knew what to expect, and they were more than ready to meet the challenger and squeeze the would-be rival out of the industry. This eventually occurred on December 25th, 2018, when GMO decided to call off the mining operation.
As a result, the company lost $320 million instantly, and they assessed that it would be difficult to sell mining gear at this point, which is to say that the losses cannot be compensated in such a way.
Bitmain Itself Had A Difficult 2018
While Bitmain was more than capable of handling some new competition, recent reports state that this company also experienced losses in previous years. At one point, Bitmain sold many of its miners, and it attempted to establish dominance over the industry by entering a price war which its competitors would not be able to afford.
It is important to mention that this happened before the second market crash, while Bitcoin’s price was between $6,400 and $7,000, which still allowed the company to make money, even if it made some risky moves in this period. The demand for mining was still relatively high at the time, and the company was not as worried about its losses.
The November market crash which eventually brought Bitcoin to the price of $3,200 marked a big turnaround, however and Bitmain experienced struggle as well, with a negative profit margin of over 11%, according to reports. The reports also mentioned that Bitmain might actually not be losing that much, as the costs of mining have likely dropped as well, but there is no doubt that the company is losing money instead of gaining it.
Other reports say that Bitmain had to lay off around 50% of its workers in Q4 2018, with one Bitmain employee confirming that the actual percentage is even higher. In fact, this individual stated that some departments would have to be let go entirely because of the market situation.
This is in sharp contrast to Bitmain’s announcements made earlier in the year, when the company stated that it plans to become a competitor to AMD, Intel, and nVidia. At this point, Bitmain still had a very successful crypto mining business to back up its expansion to completely new industries.
At the time, the company’s officials stated that there are numerous similarities between AI chips and chips used for BTC mining. Because of this, the company planned to enter the AI development industry by using its existing mining chips designs for powering the AI systems. The problem that Bitmain did not anticipate (which is quite common for companies that attempt to expand in this way) was too aggressive diversification of its products and services.
The firm attempted to expand beyond crypto mining without improving their business models and core products, which has been a downfall for many others as well.
It Is Not As Bad As It Seems
According to statistics provided by a crypto market data provider Blockchain, Bitcoin’s hash rate has seen a significant impact in Q4 2018, going from 61 exahash to only 44 exahash in the last several months. During the same period, crypto miners started leaving the market in greater numbers, as mining was no longer profitable. The low price of Bitcoin was not enough to cover the high costs of the mining process, and multiple mining farms had to shut down.
However, experts believe that the situation will take a turn for the better, and that “smart money” is waiting for this to happen, although it might not be a quick, overnight shift. In fact, many believe that Bitcoin has yet to find its bottom, with estimates that this might occur in February 2019.
Another thing worth mentioning is that the current “low” hash rate of Bitcoin (44 exahash) is still much larger than the one that was recorded in early 2018 when it was at 17 exahash. In other words, even after a severe drop, Bitcoin hashrate is still about 158% larger than it was a year ago.
Despite the fact that miners are leaving, large mining facilities are not likely to abandon the mining industry. If an individual cloud miner decides to exit the space, their losses would be small. However, if an entire mining center which has signed a long-term contract with electricity providers and has bought large amounts of expensive mining gear were to abandon the space, their losses would be devastating.
In addition, many agree that miners tend to have a long-term perspective. Otherwise, they would not go through the trouble of obtaining expensive equipment and entering deals with electricity providers.
Due to bright predictions regarding the future of mining, several tech giants such as Intel and Samsung are keeping an eye on the industry, with Intel even acquiring patents for high-performance energy-efficient BTC mining. As for Samsung, the company has reportedly started with the production of mining rigs and mining chips in Suwon, South Korea.
What Will Happen In 2019?
While it is not possible to accurately predict future trends and events, a lot of large-scale mining companies are expected to continue with their operations, despite losses. While they may be losing money now, the long-term strategy remains the same. A lot of it also depends on the prices of digital assets, which are still quite low.
However, while a recovery expected to start in 2019, there is no way to tell when it will arrive, or whether it will actually start, at all. For a while, at least, large corporations such as Bitmain can afford to mine while the prices are low, at least for a while longer. In other words, even though individual miners have left the mining industry due to the bear market, mining facilities will not follow, and the crypto industry should remain functional until the individual miners’ return.
Bakkt Futures to Launch in the Current Quarter
Managing director and quant strategist at Fundstrat Global Advisors Sam Doctor suggested in a Twitter post published on July 19 that Bakkt’s Bitcoin (BTC) futures contracts will launch this quarter.
According to the post, which includes a summary of Fundstrat’s takeaways from the Bakkt Digital Asset Summit held on July 18, the firm’s futures will launch in the current quarter. The launch is set to follow tests announced last month, which are scheduled to start next week. The firm believes that the launch will be a catalyst to accelerate entry of traditional institutional investors. The post notes:
“THERE APPEARS TO BE A CRITICAL MASS OF ADOPTERS READY TO COME ON BOARD ON DAY 1 OF THE BAKKT LAUNCH, WITH THE SALES TEAM GAINING TRACTION AMONG BROKERS, MARKET MAKERS, PROP TRADING DESKS AND LIQUIDITY PROVIDERS.”
During the aforementioned event, Commodities Futures Trading Commission (CFTC) commissioner Dawn Stump apparently expressed that no current cryptocurrency could threaten financial stability and that the regulator sees a growing demand for Bitcoin futures from the public. Also during the summit, chief information officer at crypto investment firm Blocktower Ari Paul was reportedly confident that once a killer app or user interface makes cryptocurrency on-ramps safe, reliable and as easy to use as Paypal, retail adoption will be enormous.
According to the Fundstrat notes, Paul also said that institutions should not dismiss crypto assets, considering their low correlation with traditional assets and with compound annual growth rates of 200%-300%. He also said that inflation and confiscation resistance of cryptocurrencies are a key value proposition.
Pantera Capital CEO Dan Morehead, on the other hand, said that most tokens will fail and a handful of base protocols will survive, but with thousands of decentralized applications built on top of them.
As Cointelegraph reported in May, the Intercontinental Exchange is reportedly taking steps to ensure approval from the United States CFTC for Bakkt.
Bitcoin Price Slips 10% in 24 Hrs as Fed Raises Facebook Libra Concerns
Bitcoin Price Slips 10% in 24 Hrs as Fed Raises Facebook Libra Concerns
Bitcoin price (BTC) shed more than 10% on July 11 as markets appeared to react to criticism of Facebook’s Libra from a senior United States lawmaker.
Market visualization courtesy of Coin360
Data from Coin360 sees the majority of cryptocurrencies firmly in the red Thursday, hours after Federal Reserve Chairman Jerome Powell said Facebook’s offering should not continue development.
Libra, which aims to act firstly as a cross-border payment method, allegedly buoyed Bitcoin throughout recent weeks, with commentators arguing its public profile was driving publicity and uptake of Bitcoin itself.
Powell’s demands, which follow similar words from representatives of the Senate House of Financial Services Committee, leant weight to that theory.
“Libra raises serious concerns regarding privacy, money laundering, consumer protection, financial stability,” he said during a speech before a congressional committee. “These are concerns that should be thoroughly and publicly addressed.”
“THESE ARE CONCERNS THAT SHOULD BE THOROUGHLY AND PUBLICLY ADDRESSED.”
At press time, BTC/USD traded down 10.4% at $11,530, having risen as high as $13,160 in recent days.
Bitcoin 7-day price chart. Source: Coin360
The drop places the pair still within its recent corridor between around $9,700 and $13,800, with volatility still in evidence across crypto markets.
Altcoins, meanwhile, delivered noticeably worse performance as Bitcoin price fell, with several assets in the top twenty by market cap shedding 15% or more.
Ether (ETH), the largest altcoin, lost a similar amount to Bitcoin, hitting $272 and firmly losing support at $300 once again.
Ether 7-day price chart. Source: Coin360
Among the worst performers were Bitcoin SV (BSV), which lost 17.2%, and EOS (EOS), which was down 20.2%.KEEP TRACK OF TOP CRYPTO MARKETS IN REAL TIME HERE
Bitcoin Approaches $11,000 With All Top 20 in Green
Saturday, July 20 — crypto markets have seen another upward move, with all top 20 coins by market cap seeing major gains, while Bitcoin (BTC) has approached $11,000 mark again.
After dipping below the $11,000 threshold on July 14, Bitcoin has approached the price point today, with its intraday high of $10,944, according to data from CoinMarketCap. The biggest cryptocurrency added 3.7% to its price to trade at $10,922 at press time. As Bitcoin has seen significant volatility this week, with its price having dipped below $9,500, the cryptocurrency is down around 3% over the past 7 days at press time.
Ether (ETH), the second cryptocurrency by market cap, is up over 5% and trading at $232 at press time. The top altcoin is down 13.4% over the past 7 days.
Ripple (XRP), the third top cryptocurrency by market cap, added 6.4% to trade at $0.339, also seeing a notable growth over the past 7 days, adding up to about 2.6%.
Bitcoin SV (BSV), the ninth top cryptocurrency by market cap, has added over 25% to its value today, seeing the biggest growth among the top 20 coins by market cap.
As of press time, total market capitalization amounts to $298 billion after that number dropped below $250 billion earlier this week. Daily trade volume amounts to around $63 billion.
The new wave of green on crypto markets follows a recent bullish prediction by managing director and quant strategist at Fundstrat Global Advisors Sam Doctor, who suggested that much-anticipated Bakkt’s Bitcoin futures contracts will launch in Q3 2019.
Additionally, India’s Minister of State for Finance Anurag Thakur said yesterday that there is no legislation in India that expressly bans citizens from using cryptocurrencies.