Apparently Bitmain’s dominance has been decreasing in both mining rig manufacturing and mining pool hash rate, as Bitmain’s competitors eat up an increasing amount of the market share in the mining industry. This spurred Bitmain Co-Founder Jihan Wu to take over as Chairman and CEO, ousting Co-Founder Micree Zhan in the process.
Wu is now introducing a new business strategy that will take on more risk related to cash flow, Bitcoin (BTC) price volatility, and electricity costs, in order to increase mining rig sales and to mine more Bitcoin (BTC) for the company.
Bitmain is introducing co-mining, where essentially Bitmain allows mining farm operators who have excess electricity capacity to ‘rent’ rigs from Bitmain. The rigs provided would be top of the line, and Bitmain would pay electricity costs at the rate of $0.05 per kilowatt-hour. Bitmain would then receive 75% of Bitcoin (BTC) mining revenue while the mining farm operator receives 25%.
With this move Bitmain is aiming to mine more Bitcoin (BTC) and HODL. Additionally, Bitmain is expanding their corporate mining farms. Bitmain’s mining hash rate has increased from 237 PH/s in May to 930 PH/s currently.
Essentially, Bitmain is investing significant resources towards accumulating Bitcoin (BTC), and seems to be betting on the Bitcoin (BTC) block halving of May 2020 causing a major rally.
Another strategy change is that bulk mining rig customers that buy between 100 and 999 rigs can put a 50% down payment rather than 100%, and customers buying more than 5,000 rigs can make a down payment as low as 20%. The customer will still have to pay in full 7 days prior to the shipment, but this move puts short term cash flow pressure on Bitmain instead of the customers.
In other words, Bitmain is now pressured to ship the rigs as fast as possible, versus mining companies in the past which received 100% down payments and often delayed rig shipments since there was no pressure.
Finally, Bitmain will take on some of the risk of price volatility, by giving customers who buy 1,000 rigs Bitcoin Options equivalent to 1% of the order cost. These Bitcoin Options can be used to sell Bitcoin (BTC) at $5,000 on March 27. Basically, Bitmain is saying that if Bitcoin (BTC) somehow crashes below $5,000 in the next few months then they will be willing to pay customers some money, slightly offsetting their loss. That being said, Bitmain is betting on a block halving rally, so they probably do not think that these Bitcoin Options will ever be used.