Halving market may be the beginning of mining difficulty for Bitcoin miners.

Chinese mining machine manufacturer Canaan Creative went public on NASDAQ on November 21, 2019, with CEO Zhang Nangeng ringing the bell at the listing ceremony. The company is considered to be the first successful mining machine enterprise to be listed in China. Previously, the more influential Bitmain had attempted to go public in Hong Kong but did not succeed, and quickly fell into an "internal war" for various reasons.

Many people in the digital currency industry often regard mining machine manufacturers as the top of the industry. It seems that continuous funds are flowing to mining machine manufacturers. In the eyes of many, each Bitcoin mining machine is like a "money-printing machine," seemingly bringing wealth as long as you can buy the machine. However, the reality seems different because the huge fluctuations in Bitcoin prices have always been a major concern for miners.

The so-called "Bitcoin mining machine" is a computer designed specifically for the Bitcoin algorithm, and the chips inside are customized for that algorithm. According to the algorithm designed by Satoshi Nakamoto, Bitcoin was born on January 3, 2009, initially producing 50 every 10 minutes. This production rate can be maintained for about four years, then halves every four years. The first halving occurred on November 28, 2012, when 10.5 million Bitcoins were mined, and the network started producing 25 every 10 minutes. The second halving occurred on July 10, 2016, when the total reached 15.75 million (5.25 million newly generated, half of 10.5 million), halving again to produce 12.5 every 10 minutes.

Based on the current rate, the next halving is estimated to occur around May 2020. Once the production decreases sharply while demand remains the same, prices are expected to rise. This seems to be the main logic for many Bitcoin investors currently, leading many in the industry to believe in the so-called "halving market" in 2020. As a result, many have invested heavily or increased their investments in Bitcoin mining, causing a continuous increase in Bitcoin hashrate.

Calculating at a price of $7,200 per Bitcoin, with the current production rate (12.5 every 10 minutes), Bitcoin miners will produce approximately $4.73 billion worth of Bitcoin in a year. Considering Bitcoin's current good liquidity, it's not surprising why so much capital is invested in Bitcoin mining.

Regarding the so-called "halving market," if we observe the trend of Bitcoin prices, the rising trend of Bitcoin usually appears at least half a year or a year after halving, reaching its peak almost a year later. The previous two peaks were in December 2013 and December 2017. Given this long delay, the correlation between the Bitcoin market and halving seems questionable.

At least for the peak in December 2017, it is generally believed that it was due to the ICO frenzy, which attracted a large amount of hot money into the digital currency industry, creating a huge bubble, seemingly unrelated to whether Bitcoin halved. Even the peak at the end of 2013, which was related to Bitcoin halving in November 2012, seems insufficient to provide enough reason to believe that the halving in 2020 will definitely lead to a Bitcoin frenzy.

Nevertheless, there are still many people who believe that the "halving market" will definitely appear in 2020 and have invested a massive amount of funds in purchasing Bitcoin mining machines to start mining. Although we do not know exactly how much capital has been invested, the rapidly growing hashrate data tells everything.

Since June this year, Bitcoin network hashrate has increased by 80%, possibly due to the use of advanced mining equipment. According to a recent report by digital asset management company CoinShares, Chinese Bitcoin miners currently control about 66% of the global "hashrate," the highest recorded since China's share exceeded 60% in June. Chris Bendiksen, research head at CoinShares, stated that the growth in Chinese miners' hashrate may be due to the adoption of more advanced mining equipment.

CoinShares also mentioned that the most important mining centers globally are located in Yunnan, Xinjiang, Inner Mongolia, and Sichuan provinces in China, with Sichuan accounting for over half of the global hashrate. Other centers are distributed in the United States, Russia, Kazakhstan, and others.

The company predicts that as Chinese companies like Bitmain produce mining machine chips that are easier to export, Bitcoin hashrate will be more evenly distributed worldwide.

The current network hashrate is approximately 95E, and based on the current incremental rate, the hashrate may rapidly climb by 10E-15E in the coming months. By the time of next year's halving, the hashrate may reach a record 140E-150E. If Bitcoin's price remains at $7,200, it means that the total revenue of the mining industry will return to around $3,600 after halving ($7,200/2). When Bitcoin's price was around $3,600 last time, the network hashrate was only between 40E-45E. This would likely put unprecedented pressure on Bitcoin miners and ultimately transmit the pressure to mining machine manufacturers.

Jia Nan Yun Zhi's IPO price was $9, with an initial supply of 10 million and a fundraising amount of $90 million. As of December 13, its price has fallen to $5.71, a drop of nearly 37%, indicating investor concerns about the future mining business.

Compared to Bitmain and Whatsminer, the drop in Jia Nan Yun Zhi's stock price probably won't attract much attention. Recently, Wu Jihan of Bitmain regained control of the company through a series of operations, while Jihan Wu seems to indicate that he will not give up easily. On December 15, according to reports, Whatsminer founder Yang Zuoxing was sued by judicial authorities for duty encroachment, mainly involving intellectual property disputes with Bitmain.

However, looking at the current situation in the industry, many people are hopeful for the "halving market" and have already deployed large-scale funds. But if the market does not appear as expected, it may create significant pressure on the entire Bitcoin mining industry, and even unprecedented "mining difficulties" may arise.

This article is from our partner LONGHASH

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