Mining Oligopoly: Six Pools Control 75% of Bitcoin's Hashrate, Data Shows

Data analyzed by leading fintech media company ChainDD has recently found that six mining pools currently control nearly 75% of the Bitcoin network’s hashrate, and five of them are located in China. Notably, three are associated with crypto mining hardware manufacturer Bitmain.

According to ChainDD’s 2018-2019 Cryptocurrency Market Annual Report, created by its DD Think Tank, 80% of Chinese bitcoin miners are located in Sichuan, and although most cryptocurrency miners are currently located in the country, some are moving overseas “due to restrictions.”

China offers crypto miners cheap energy sources, thanks to various natural resources it takes advantage of. Its government, however, has cracked down on cryptocurrencies in the past, although recently a court ruled Bitcoin should be protected as property by law.

The report further found that large mining companies are more prone to hold onto their mining machines during bearish market turns, as the amount they’ve invested in their operation justifies it. This, it claims, gives them a competitive advantage later on, as they mine at a loss coins that gains value in the long run. It adds:

Additionally, large mining companies are more resilient against risks of BTC price drop, thanks to their advantages in electricity and low price mining equipment.

ChainDD’s DD Think Tank noted that as of January 21, six mining pools – BTC.com, Antpool, SlushPool, ViaBTC, and F2Pool, had 74.48% of the BTC network’s hashrate. These pools, with the exception of SlushPool, are based in China.

Out of these three are related to Bitmain “directly or indirectly.” These are BTC.com, which had over 21% of the network’s hashrate, Antpool (13.9%), and ViaBTC (10.51%), which received investments from the firm.

Bitmain, as CryptoGlobe covered, was eyeing an $18 billion initial public offering (IPO) last year, potentially the largest in history. Since then, it has been revealed the Hong Kong Stock Exchange (HKEX) is “hesitant” to approve its IPO.

Daily BTC Production Dropped

The report further found that the rate of new Bitcoin’s coming into the market decreased last year. It was at an annual high in January of 2018, as 2,038.31 coins entered the market a day, while in November the number dropped to 483.

Notably, Bitcoin’s mining difficulty increased 173.2% throughout the year. November’s dip in the amount of coins coming into the market is associated with Bitcoin Cash’s (BCH) hard fork that created Bitcoin Satoshi’s Vision (BSV).

Amount of BTC produce per month last year

This, as at the time BTC’s hashrate dropped significantly, presumably as both sides of the fork battled to try and control hashrate. While BSV threatened to mine empty blocks on BCH, the BCH side attempted to stop that from happening, leading to what became known as a hash war.

It’s known that Bitcoin.com’s mining pool, at least, diverted its BTC hashrate to BCH to contribute. Reports suggested before the fork Bitmain deployed 90,000 Antminer S9 ASICs to prepare.

Billionaire Novogratz: Altcoins Won't Pump Like In 2017 Bull Run, Bitcoin Will Dominate

It appears that cryptocurrency prices have finally begun to recover after enduring an extended bear market which lasted throughout 2018.

As the market capitalization of Bitcoin (BTC) and other major cryptoassets continues to rise, several analysts have been drawing comparisons between what they’re seeing in the current market and what they observed during the historic bull market of late 2017 and early 2018.

Commenting on the recent crypto market price movements via Twitter, Ran NeuNer, the host of the CNBC Africa Trader show, remarked:

The market is running but we still haven’t seen the crazy alt pumps, pumps where coins do 40% in a day...is it coming?

Bitcoin To “Outperform” All Other Cryptos “This Time”

As the bitcoin price begins to recover, there have been many predictions made regarding the anticipated performance of altcoins. Twitter user “Crypto Bitlord” (@Crypto_Bitlord), a widely-followed digital asset market analyst, believes XRP, which currently has a market cap of around $16.3 billion, may trade as high as $10.

However, prominent crypto investor Michael Novogratz believes that digital asset traders are a lot smarter this time, when compared to some of the bad investment decisions they might have made during the initial coin offering (ICO) craze of 2017.

Novogratz, who’s the founder and CEO of Galaxy Digital, a full-service crypto merchant bank, has predicted that in this market run, Bitcoin will “outperform” all other cryptoassets.

On May 16th, 2019, the Bitcoin price surged to a 2019 high of $8,373 according to CryptoCompare data. In response to bitcoin’s recent price movements, Juan Villaverde, the Chief Analyst at Weiss Crypto Ratings, told CryptoGlobe: 

Bitcoin could fall to as low as $4,400. But [if] it does, it will be the best Bitcoin buying opportunity since 2015.

“More Good News For New Bitcoin Users”

Villaverde, an econometrician and mathematician focused on developing various crypto index models at Weiss Ratings, believes bitcoin would be a great buy at a lower price (as suggested above) because of the following reasons:

  • “The usage of Bitcoin is near all-time highs – 450,000 transactions per day. That’s up from a low of 150,000 in April of 2018 and approaching the all-time high of 490,000 in December of 2017.”
  • “Despite the high transaction volume, fees on the Bitcoin network are at their lowest levels since August of 2017 – more good news for users.”
  • “The Bitcoin block size is now greater than ever before, thanks to the Segwit technology upgrade.”

Villaverde further noted that the predictions are “based on studying the time patterns in Bitcoin's rises and falls throughout its 9 year trading history.” He explained that the time patterns have been analyzed by using an “algorithm-based market cycles model.”

The Chief Analyst at Weiss Ratings also mentioned that the bear market “ended on December 15th 2018 and the model confirmed this shift in trend on March 26th of this year.”

He added:

Then, after the rally that took place starting on April 25th, the same model told me a new bull market was now underway. The same model indicated a 30% to 45% correction due as of late April-early May and we seem to be experiencing that right now.