Bitmain's "Three Axes" Opens the Era of Mining Leverage

event

On December 7, Bitmain launched its latest mining machine sales model at a customer appreciation meeting held in Chengdu.

Risk warning: regulatory policy risk, market trend risk

text

1. Bitmain launches three promotional measures

The sales model of the S17 series mining machines launched by Bitmain this time has the following main features:

Mining machine leasing model. Bitmain provides S17 series mining machines and electricity costs, and the partner provides operation and maintenance and site. Settlement is made after one year of joint mining. After deducting electricity costs, the customer can get 25% of the net profit from mining, and the rest belongs to Bitmain. If the net profit is less than the electricity cost, no profit will be distributed.

Supports installment payments. According to information disclosed by Bitmain, miners can enjoy a down payment discount of up to 20% depending on the number of mining machines ordered.

Buy a mining machine and get a free option. In order to boost the sales of mining machines and help customers hedge the risk of falling coin prices, customers with orders of more than 10 million yuan will be given a put option worth 1% of the order amount.

2. Behind the leverage: coin prices fall, mining machine sales decline

The alternation of old and new mining machines. On November 25, the BTC price fell to the lowest point in 2019 (US$6,638), which is lower than the shutdown price of the S9 series mining machines. Since its launch in 2016, the Antminer S9 has always occupied a mainstream position in the mining machine market and even became the standard for BTC miners. However, with the emergence of new mining machines with low power consumption and high computing power, the mining computing power of the entire network has been continuously pushed up. With the recent decline in BTC prices, the profits of S9 mining machines have gradually decreased, and there is even a situation where the value of mining output cannot cover the electricity bill and operation and maintenance costs.

Mining machine sales are declining, and mining machine prices are continuing to fall. BTC prices continue to fluctuate, and the future trend is unclear. At the same time, the payback period of new mining machines will be extended due to the halving of BTC production in 2020. Therefore, miners remain on the sidelines, and mining machine sales are declining, and prices are continuing to fall. Therefore, Bitmain launched this sales model, trying to learn from the marketing methods of traditional industries to promote the new S17 mining machine.

Relieve financial pressure and increase mining machine sales. The mining machine market has always been characterized by heavy investment and long cycles, so the entry threshold is relatively high. In order to increase the sales of mining machines, alleviate the problem of tight funds in mining farms and mining pools, and provide convenience for miners and investors who want to participate in mining on a large scale but lack funds, Bitmain has launched a preferential plan for installment payments. In addition, installment payments can also help alleviate Bitmain's own financial pressure and sales pressure. Installment payments are a typical marketing plan in traditional industries. Bitmain's introduction of the installment payment model means that the sales of mining machines has ushered in the era of leverage.

Options hedge against falling token prices and ease customer concerns. Bitmain provides customers with orders of more than 10 million with a put option of 1% of the order payable amount. If the future token price is lower than the option's strike price, income will be generated to compensate for the loss caused by the falling token price. In essence, the BTC mining machine market is a medium-term call option, and the put option provided by Bitmain can be regarded as a kind of insurance to hedge mining losses under extreme market conditions.

3. Mining will become more centralized and institutionalized

With the gradual popularization and application of new high-computing power mining machines, the increase in computing power is inevitable, and the difficulty of mining will also show an upward trend.

Mining machine versions are updated, and new mining machines occupy the market. For the mining machine market, through the profit-sharing sales strategy of mining machine manufacturers such as Bitmain, new mining machines will soon be widely deployed to occupy the mining machine market. This situation is bound to lead to an increase in computing power in the future, an increase in mining costs, and an acceleration of the elimination of old mining machines and the update of mining machine versions.

Mining will become more centralized and institutionalized. With the increasing attention paid to the blockchain industry and the good news that Canaan Creative successfully landed on NASDAQ, the mainstream financial market has gradually accepted mining assets. Large-scale entry of funds and financial means have become new features of the recent development of the mining industry. The entry of a large amount of capital and giants means that the mining industry will also move towards centralization and institutionalization.

Notes:

Due to some reasons, some of the terms in this article are not very accurate, such as: token, digital token, digital currency, currency, token, Crowdsale, etc. If readers have any questions, please call or write to discuss.

For the original report, please see the research report released by [Tongzhengtong Research]: "Bitmain's "Three Axes" Open the Era of Mining Leverage - Blockchain Event Comments 1211"