CoinDesk released a news piece during the week reporting that Bitmain is believed to be putting $80 to $100 million worth of hardware into their own proprietary mining operations. Over the past few years, the proportion of revenue earned by sales of mining hardware has risen to 94%.
The news piece is based upon reports from mining farm operators in the southwestern regions of China that are closely linked with Bitmain. The farmers reported that Bitmain will be deploying approximately 200,000 hardware models including their latest hardware devices as well as older models.
The opportunity cost in not selling this hardware is estimated to between $80 million to $100 million and this implies that Bitmain is anticipating it is more profitable to put this hardware into mining. Could they be seeing that conditions in the crypto market are changing?
There are a number of factors which may be playing into Bitmain’s decision to invest this hardware into proprietary mining:
The natural winner-take-all power law has come into play for the bitcoin futures market. CBOE has made the decision to not add any more bitcoin futures products.
The last active bitcoin futures products traded on CBOE are set to expire in June. The decision comes as volumes traded on CBOE continued to dwindle in comparison to competitor CME.
This is the natural winner takes all effect of markets coming into play with traders naturally gravitating towards the most liquid market.
Analysts at Messari have noted a number of reasons for CME dominating bitcoin futures despite CBOE listing bitcoin futures prior to CME:
Binance Research released a study last week which analysed correlations among major cryptocurrencies. Not surprisingly, bitcoin was found to be highly correlated with other top altcoins in terms of USD returns with an average correlation of 0.78.
Correlation calculations were carried out for both USD returns and BTC returns among the top 30 cryptocurrencies. The correlations were calculated for returns over the past three months (1st December 2018 to 1st March 2019) and calculations were also completed for the period a year prior (1st December 2017 to 1st March 2018) and mid-2018 (1st June 2018 to 1st September 2018).
The key findings of the study were the following:
Although the price of bitcoin has recorded increases over the past several weeks, the movements have been weak with small-bodied candles being recorded on the weekly chart.
The price is approaching the downward trendline that it has failed to surpass several times in 2018. This is the trendline which catalysed an almost 50% decline in price in November.
The price sold off on Thursday as it approached the trendline and the daily timeframe has been forming Doji candles since which typically reflect uncertainty.
There is also an area of seller liquidity just above price from around $4080 to $4250. Prices have entered this territory several times in recent price action to find sellers willing to push prices down.