The Bitcoin (BTC) mining hardware sector is opening up. New hardware manufacturers are entering the market with innovative new mining units, reducing the former dominance of major players such as Bitmain and Canaan.
And with the Bitcoin halving in May putting an extra squeeze on the profit margins of miners, hardware manufacturers are being increasingly forced to introduce more efficient units, raising competition within the sector even further. In the process, newer mining hardware companies like MicroBT might gain a bigger market share.
That said, industry experts predict that the likes of Bitmain will still lead the market for the foreseeable future. Regardless, increased competition in the sector will be good for miners and good for bitcoin’s price, since with more efficient machines miners will face less pressure to sell BTC.
Less concentration, but familiar leaders
The story of the past few years has been that Bitmain is losing its dominant market share. Back in 2017, its share of the mining hardware sector was estimated to stand at around 75%, but this fell to 70% in June 2019 and then 66% in December 2019, according to an industry report from CoinShares.
And in 2020, cryptocurrency figures such as Tuur Demeester, Founder of Bitcoin alpha fund Adamant Capital, are predicting that the “era of Bitmain is truly over.”
The era of Bitmain truly is over. Due to the commoditization of chips and machines, it’s unlikely that any one bitc… https://t.co/SBTPDqhDse
On the other hand, people working specifically within mining still expect Bitmain to remain the biggest manufacturer.
As explained to Cryptonews.com by Tim Rainey, the Chief Financial Officer at New York-based mining co-location provider Greenidge Generation, Bitmain’s position – and that of other larger manufacturers – will be protected in part by Bitcoin’s overall expansion.
“Although Bitmain’s market share has decreased in the past year, the market size has more than doubled in the same time, with the hashrate now more than twice of what it was in June 2019, and Bitmain still continues to hold the majority of the global market share,” he says.
Rainey agrees that MicroBT’s market share appears to be increasing the fastest among other manufacturers. However, he expects that “Bitmain would continue to be the market leader in the foreseeable future because of the performance, reliability and after-sales’ support of the Antminer machines.”
Likewise, regardless of its exact market share, Canaan reports to Cryptonews.com that its sales have increased this year.
“In Q1 this year, Canaan’s total net revenue was RMB 68.3m, reflecting a 44.6% YoY increase,” says a spokesperson for the company. “The company’s total net revenue growth aligns with the computing power sales. The company’s total sales grew from 700,000 Thash/s to 900,000 Thash/s in Q1 2020, representing a 18.4% YoY increase, and with an increased average selling price.”
However, as reported, in Q1, their loss from operations increased by 23%, to USD 10 million. Also, the company said it won’t issue a business outlook for the second quarter of 2020 due to “the evolving nature of the COVID-19 pandemic and the uncertainties surrounding the Bitcoin halving event.”
Mining and bitcoin price doing well post-halving
It seems that Bitcoin’s third halving in May has passed without any real drama, leaving bitcoin’s price largely intact.
This eases some of the pressure on miners, meaning that there’s less pressure to upgrade to newer, more efficient machines. In addition, OKEx’s CEO Jay Hao, notes that two additional factors have helped to maintain the hardware market in its current state.
“The rainy season in much of China results in a lot of surplus hydropower and much cheaper electricity,” he tells Cryptonews.com. “The difficulty adjustment has also been lowered twice since the halving, making it easier and less power-intensive to mine bitcoins.”
Basically, the third Bitcoin halving hasn’t caused as much of a shakeup in mining as some predicted.
Even so, this grace period is unlikely to last for long, particularly when mining rewards have been cut. As such, Canaan is expecting a steady increase in pressure on manufacturers over the coming months, forcing them to produce ever-more efficient hardware.
Its spokesperson explains, “The bitcoin miner manufacturers need to further improve the profitability of mining machines to avoid the fate of being marginalized by the market, which requires the development of more advanced chips, higher integration and lower energy consumption.”
On top of this, Canaan also expects that “manufacturers need to develop a simpler computing delivery service model to attract potential customers to join the mining industry.”
Taken together, these are challenges and opportunities for manufacturers, potentially enabling newer entrants such as MicroBT to make more headway.
“We expect more new players to emerge in the mining hardware sector,” says Greenridge Generation’s Tim Rainey. “This would make the market more crowded for manufacturers whose machines are not the most efficient.”
Rainey also points out that, since the start of 2019, the competition among manufacturers has “increased significantly, squeezing the margins of manufacturers of less efficient machines more than those of Bitmain or MicroBT.”
This is good for miners and for Bitcoin, since when the margins of manufacturers are squeezed, they’re more incentivized to innovate, in order to regain market position.
Canaan says that it’s designing and planning new units all the time.
“We believe platform design of mining machines can reduce costs, shorten design cycles, and simplify customer deployment and maintenance,” says its spokesperson. “Avalon 1066Pro is our first serialized product under such a concept which is currently available to our clients. The Avalon 1146Pro will be made available soon after.”
So regardless of who will be the market leader in a few years’ time, increasing competition will only speed up the pace of mining innovation. In turn, this might lure more Bitcoin miners into the most powerful cryptocurrency network.