Bitmain's Bitcoin Mining Hashrate Drops 88% in “Natural Course of the Mining Business”

Beijing-headquartered Chinese cryptocurrency mining giant Bitmain Technologies, one of the largest crypto mining hardware manufacturers in the world, has recently seen its bitcoin mining hashrate drop by a whopping 88%.

The noticeable drop was revealed through a hashing power disclosure the company releases every month. As of May 7, Bitmain’s hashrate running the SHA-256 algorithm – which both bitcoin and bitcoin cash are based on – dropping from 2,072 PH/s to just 237.29 PH/s.

The company notably manufactures equipment that it sells to others, but uses some of its machines to mine for itself. Bitmain reportedly started disclosing its hashrate back in July of last year, at a time in which it had slightly less than 1,700 PH/s. Its hashrate increased to 2,339 PH/S by October of last year, but then dropped to less than 1,700 PH/s.

This drop occurred in March and coincided with an overall decline in the Bitcoin network’s total hashrate, a decline seen since November of last year when BTC’s price dropped to less than $4,000. Bitmain’s hashrate then climbed again in April, before seeing the 88% drop.

The drop saw Bitmain’s share of the Bitcoin network’s total hashrate drop from 4% to 0.4%, at a time in which bitcoin’s price has been recovering, so much saw it recently moved over the $6,000 mark, according to CryptoCompare data.

The hashrate drop also comes at a time in which miners in China are gearing up to take advantage of the coming rainy season’s cheap hydroelectric power. In March, it was reported Bitmain was set to deploy 100,000 ASIC machines to mine using hydropower.

Speaking to CoinDesk, a Bitmain spokesperson didn’t reveal exactly why the firm’s hashrate decreased, but stated:

It is [in the] natural course of the mining business where the hash rate owned by one body at one instant may be owned by someone else at another instant

This statement could be related to Bitmain’s cloud mining service, BitDeer, which rents some of its flagship AntMiner machines to retail customers. On its website, most mining contracts are sold-out. It’s also possible Bitmain has been renting its hardware to other companies.

CME Looks to Double Bitcoin Futures Limit, but Is This Wise?

The Chicago Mercantile Exchange (CME) has a new request for its regulator, as it looks to double open position limits on bitcoin futures contracts in the face of significant interest.

Nasdaq reports that the CME has already petitioned its regulatory body, the Commodity Futures Trading Commission (CTFC), asking for an increase from 1000 contracts per spot month to 2000 per investor. Each contract represents five BTC, so essentially, at its peak,  a single investor's total position may edge towards a monumental 10,000 BTC.

This is in direct response to the contract's recent growth which is currently depicting record levels of activity, citing $370 million being traded per day. A spokesperson for the CME noted that the idea to increase limits was proposed on the continued maturity of the market:

Based on the significant growth and acceptance of our financially-settled CME Bitcoin futures markets, as well as our analysis of the underlying bitcoin market.

However, as Nasdaq writes the increase in the upper limit of positions is somewhat superfluous. As of July, the number of open interest contracts reached an all-time high of just 6100; given this, it seems the CME may be future-proofing.

Open to Manipulation?

However, concerns remain about the limit increase, as without them, the potential for manipulation rises; often to the detriment to the underlying asset. Although, as per the CTFC website, the threat of manipulation from bitcoin futures contracts is "low":

In general, position limits are not needed for markets where the threat of market manipulation is non-existent or very low.

Instead, Nasdaq posited that this might point to a lessening on the CTFC's strict rule of bitcoin; as well as a maturing of the market in general.

Nevertheless, some believe the CME's bitcoin futures contracts do pose a significant threat to the price of BTC; with some suggesting that blatant manipulation continues unchecked within the market.

As reported, there seems to be a correlation between the expiry dates of CME bitcoin futures contracts and a lull in the price point of BTC. In several instances, a significant drop in bitcoin's price has coincided with a closure from the CME. The most recent example of this occurred on Labor Day, September 2, when bitcoin rose an extraordinary 8% shortly after the CME shut.

Crypto analyst, Alex Kruger, highlighted this, noting the large gaps which formed on the CME chart, from the price discrepancy before and after closing.

This has become a pretty accepted practice within the market. Kruger has even gone to the lengths of compiling statistics each time this phenomenon transpired:

On these occasions, bitcoin cited an average 4.6% price discrepancy following the close of the CME.

Whether this is a coincidence or the market is indeed being actively manipulated is as yet unclear. Either way, with the increase of these limits it might be only a matter of time until we know for sure.

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