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Bitmain Is Closing Another Overseas Office – What It Means For The Mining Industry?

The current bearish trend has taken its toll on a number of firms and businesses. Many companies now seek to close up operations, lay off staff, or make other modifications to stay afloat. The latest cryptocurrency firm that is now caught in a downward spiral is the $15 billion-valued cryptocurrency mining giant Bitmain. The crypto mining company is reported to lock another office on foreign lands – this time in Amsterdam. The decision is considered as a part of the company’s ongoing business adjustment.

An overview of Bitmain:

Bitmain Technologies or Bitmain is a privately-owned crypto mining firm headed by Jihan Wu & Micree Zhan and is based in Beijing, China. It has been the undisputed king for the last few years, of both ASIC mining hardware and running massive Litecoin, Bitcoin, Dash, and other digital currency mining operations.

Bitmain found fame after their Antminer series of ASIC devices. ASICs, short for Application Specific Integration Circuits, are chips specifically designed to do only one thing – mine bitcoin. During the peak period, a single mining ASIC was sold out for thousands of dollars at various websites. It was the time when the company made waves in the crypto world.

However, the current situation in the crypto world does not bode well for the company. Prices for crypto assets continue to remain flat, and the mining profitability is at an all-time low; and so, the Antminer devices are being sold for as low as $525. Based on today’s numbers, the future does not look bright for Bitmain devices.

Reason for Bitmain’s uncertain future:

Besides the ongoing bear market, another reason why the company suffers financially is the allegedly huge investments into the cryptocurrency, Bitcoin Cash. The company hired a development staff to support the currency and dedicated mining resources towards it instead of BTC – a Bitmain-owned mining pool. Bitcoin Cash was trading for around USD 2400 at the start of 2018, but today the currency is trading for under USD 150.

Though every cryptocurrency suffered to an extent recently, Bitcoin Cash seems to have dropped massively, resulting in a near-total loss for the company. To keep itself afloat, the company has undergone a series of layoffs, shut down its office in Israel, halted its mining operations in Texas, and as per the latest news, the company is closing another overseas office.

The reports so far:

The reports so far suggest that Bitmain has decided to lock another of their overseas office in Amsterdam. The decision is considered as a step towards remolding its business framework.

In a statement released on January 14, a representative of the firm said that the decision to shut down the Amsterdam office had been made while the accurate timeline of the closure has not been set yet.

He further added that as the company aims to build a long term, and sustainable business framework, some critical adjustment to the staff and projects are in the making. This includes the choice to close the firm’s Amsterdam and Israel offices. The statement on the closure of Amsterdam closure and layoff was kept quite brief and indicated the company’s intention to solely focus on what lies ahead. It said:

“We are really focusing on things that are core to our mission and not things that are auxiliary. We will continue to hire the best talent from a diverse range of backgrounds.”

The closure of Britain’s office in Israel was confirmed earlier in December, last year.

What will be the implications for the mining industry?

The Bitmain’s report has raised concerns among enthusiasts in the mining industry, who are wondering about the impacts of this decision. Right now, Bitmain is still an actively operating company. They are accepting orders for mining hardware, and might still have some of their mining hardware running at multiple locations in or outside of China.

Researcher and analyst Alex Krüger believes that the current decision of Bitmain closing some of its operations isn’t necessarily a big deal. The report related to Bitmain might not be as negative as many of the individuals believe. In a tweet, Alex said that Bitmain is mainly an ASIC chips designer and a mining hardware seller. For him, the firm shutting down its mining operations is not a big deal. As per the Bitmain IPO prospectus, the operating mining pools that it has amounted for 1.5% of its revenue, while proprietary mining generated 3.3 percent of the company’s revenue.

As the company closes some of its international offices, reports say that the company could soon cut its employees and the staff that it has. The company currently keeps 2,600 employees, over 20 percent of them are working in the mining sector, which could turn negative if the mining firm decides to fire them.

According to Globes Israel, the 23 employees at the Ra’anana office will be laid off in the process. Glikberg himself is leaving the company in the wake of the closure, who once, in an interview, aimed to increase his team to up to 30 employees by year’s end and was anticipating growth in 2019. However, the tables have turned, and they have been forced to either shut down or alter their operations to stay competitive in the current market climate.

Besides, if the company continued the downtrend and shrank at the current pace for a considerable period, it could have a massive impact on all cryptocurrencies. For starters, the leading cryptocurrency mining giant and the biggest suppliers of ASIC miners would cease to exist. This could impact the supply of these devices and their market price.

It would also have a considerable impact on many cryptocurrencies, including Litecoin, Dash and Bitcoin Cash. The sudden sharp reduction in hash rate could expose smaller networks to 51% attacks – an attack on a blockchain, by an individual miner or a group of miners controlling over 50 percent of the network’s mining hash rate or computing power. As the monopoly of Bitmain end, many more individuals and small-scale miners can come back into the fold as the hash rate drops, which will, in turn, reduce the difficulty.

The closure of Bitmain’s overseas office may also encourage other contenders to get involved in the mining industry and resist the ASIC invasion. It would also allow Ethereum to switch its proof-of-work (PoW) consensus algorithm to proof-of-stake (PoS), that is expected to replace miners with validators. The PoS protocol further plans to remove the expensive and power-hungry ASIC machines used by leading mining firms like Bitmain.

Conclusion:

A world without Bitmain’s ASIC mining hardware would be very different from the world we are in today. The current situation may be a bump in the road, and the company may pick up once the crypto asset prices start to increase steadily. Or perhaps this is just the beginning of the demise of Bitmain. In any case, only time will tell what impacts it will have on the mining industry.

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