The Bitcoin mining industry (BTC), makers of ASICs, is expected to consolidate further due to fierce competition, geopolitical pressures and slower investment returns after Bitcoin’s halving.
In a new BitMEX report, released June 15, researchers wrote that they „think only 2 to 3 players will be able to survive in the long term.
The report analyzes the history and current state of the ASIC industry, focusing on the main players currently involved: Bitmain, MicroBT, Canaan and Ebang.
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ASIC refers to mining hardware that uses specific integrated circuit chips, which are customized to efficiently extract crypto currencies based on a specific hash algorithm.
On the other hand, configurations using GPUs (graphics processing units) are less specialized and therefore have so far struggled to compete for network rewards with those implementing ASICs.
This has led to persistent concerns about centralization across multiple block chains, due to the increased capital investment costs for potential miners.
Consolidation among ASIC manufacturers themselves, as suggested by BitMEX analysis, implies increased concentration at various levels of the industry.
Consolidation in general?
It should be noted that the BitMEX report expects that not only ASIC manufacturing will continue to consolidate, but also the mining operating sector.
In its Q&A session in the first quarter of 2020, ASIC manufacturer Canaan revealed that
„Even after halving, we have more and more orders and in large quantities. We see that sales are increasingly for key customers or large clients.
BitMEX researchers say they heard the same message in discussions with ASIC manufacturers MicroBT and Bitmain.
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Reasons for consolidation in ASIC manufacturing
The BitMEX report indicates that Bitmain, whose market share was 75% during the 2017 market, has been losing dominance in the last 18 months to new players like MicroBT. It is estimated that the latter has 35% of the market in 2019.
However, Bitmain remains, for the time being, the „main player,“ despite „facing an almost ridiculously bad corporate governance situation in the midst of a power struggle among its main executives.
Meanwhile, rival manufacturer Canaan has secured a public listing and thus offers more transparency in its operations and profits, but BitMEX points out that
„ASIC manufacturing is a heavy and difficult industry given the technical leadership that MicroBT and Bitmain have, without a strong lockdown of Bitcoin, the road ahead for Canaan could be challenging.
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Ebang, which is also looking for an IPO (such as Bitmain), faces „a relatively weak market position with respect to the energy efficiency of its products“.
Other factors putting pressure on industry players include tensions over U.S.-China trade, the impact of COVID-19 and the political situation in Hong Kong.