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Comparing the struggles of the cryptocurrency mining industry of 2018 with the future of 2019

Crypto-mining-problems-in-2018-and-what-to-expect-in-2019

Crypto mining it is one of the key aspects of cryptographic space and a driving force behind blockchain technology. However, due to the bear market and other problems that the industry faced in 2018, a significant lack of popularity of this particular sector was noted. Not only that, but also existing miners have decided to abandon the mines and find another way to get a profit through the digital currencies.

The OGM loses $ 320 million

According to last year's reports, the Japanese Internet conglomerate, GMO, suffered huge losses in the last quarter of 2018. The loss was not expected, and the company itself admitted how much. As a result, they had to abandon the mining activity they had originally entered only several months earlier, in June.

At the time, the company wanted to become a competitor of the world's largest crypto-based company, Bitmain. They used 10% of their resources and capital to start mining, after obtaining advanced technologies and developing methods that would guarantee lower energy consumption. However, this was not enough, as the company did not take fully into account the actual size of the Bitmain operation.

At the time, Bitmain was looking for over $ 15 billion, while GMOs were valued at only 10% of that amount. On the other hand, Bitmain knew what to expect, and they were more than ready to meet the challenger and squeeze the potential rival out of the industry. This eventually occurred on December 25, 2018, when the GMO decided to cancel the mining operation.

As a result, the company immediately lost $ 320 million and estimated it would be difficult to sell extraction gears at this point, which means that losses can not be compensated thereby.

Bitmain himself had a difficult 2018

While Bitmain was more than capable of handling a new competition, recent reports state that this company suffered losses in previous years. At one point, Bitmain sold many of its miners and attempted to establish a dominant position on the industry by entering a price war that its competitors would not be able to afford.

It is important to mention that this happened before the second market crash, while the price of Bitcoin was between $ 6,400 and $ 7,000, which still allowed the company to make money, even though it has made some risky moves during this period. At the time the demand for extraction was still relatively high and the company was not worried about its losses.

The November market crash, which eventually brought Bitcoin to the $ 3200 price, marked a major turnaround, however, and Bitmain also experienced the fight, with a negative profit margin of over 11.3%. %, according to reports. The reports also indicated that Bitmain may not lose much, as mining costs probably also decreased, but there is no doubt that the company is losing money instead of earning it.

Other reports say that Bitmain had to lay off about 50% of its workers in the fourth quarter of 2018, with a Bitmain employee confirming that the actual percentage is even higher. In fact, this individual claimed that some departments should be left entirely due to the market situation.

This is in stark contrast to Bitmain's announcements made at the beginning of the year, when the company stated that it intends to become a competitor of AMD, Intel and nVidia. At this point, Bitmain still had a highly successful cryptocurrency to support its expansion into completely new sectors.

At the time, company officials stated that there are many similarities between chips and artificial intelligence chips used for the extraction of BTC. For this reason, the company has planned to enter the IA development industry using its existing data mining chip projects to power artificial intelligence systems. The problem that Bitmain has not foreseen (which is quite common for companies trying to expand in this way) has been the too aggressive diversification of its products and services.

The company has attempted to expand beyond encryption without improving its business models and core products, which has also been a failure for many others.

It's not as bad as it seems

According to statistics provided by Blockchain, a cryptographic data provider, Bitcoin hash has had a significant impact in the fourth quarter of 2018, from 61 exahams to only 44 exahash in recent months. During the same period, the cryptic miners started to leave the market in greater numbers, since the mining sector was no longer profitable. The low price of Bitcoin was not enough to cover the high costs of the mining process and many mining companies had to close down.

However, experts believe that the situation will take a turn for the better, and that "smart money" is waiting for this to happen, although it may not be a rapid change overnight. In fact, many believe that Bitcoin has not yet found its fund, with estimates that this could occur in February 2019.

Another noteworthy thing is that the current "low" hash rate of Bitcoin (44 exahash) is still much larger than what was recorded at the beginning of 2018 when it was 17 exahash. In other words, even after a sharp fall, Bitcoin's hashrate is still about 158% larger than a year ago.

Despite the fact that the miners are leaving, large mining facilities should not abandon the mining industry. If a single miner in the clouds decides to leave the space, the losses will be small. However, if an entire mining center that signed a long-term contract with electricity suppliers and purchased large quantities of expensive mining machinery had to leave the space, their losses would have been devastating.

Furthermore, many agree that miners tend to have a long-term perspective. Otherwise, they will not bother to get expensive equipment and make deals with electricity suppliers.

Because of the bright forecasts for the mining industry, several technology giants like Intel and Samsung are keeping an eye on the industry, with Intel even acquiring BTC high performance and energy efficiency patents. As for Samsung, according to reports, the company has started the production of mining platforms and mining chips in Suwon, South Korea.

What will happen in 2019?

Although it is not possible to accurately predict future trends and events, it is expected that many large-scale mining companies will continue with their operations, despite losses. While they may lose money now, the long-term strategy remains the same. Much also depends on the prices of digital assets, which are still quite low.

However, while a recovery should start in 2019, there is no way of knowing when it will arrive or whether it will actually start. For a while, at least, big companies like Bitmain can afford to extract them while prices are low, at least for a while. of time. In other words, even if individual miners have left the mining industry because of the bear market, the mining facilities will not follow, and the encrypted industry should remain functional until the return of individual miners.

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