Chinese Bitcoin Miners Emerge from Hibernation as Crypto Winter Ends The lengthy cryptocurrency bear market has had a profound impact on the overall crypto ecosystem. The mining industry, however, felt the full force of the crypto winter over the course of 2018, with Bitcoin mining profits falling from 90 percent in early January 2018 to just 30 percent in December. A new wave of mining hardware, however, combined with increasing market confidence, has catalyzed a decentralization of mining hardware and a sudden increase in mining profitability. The recent shift in the mining ecosystem has large-scale Chinese mining pools — many of which benched hundreds of thousands of ASICs last year — considering the reactivation of more than one million units. China Eyes Mass ASIC Reactivation A large portion of the hash power directed toward the Bitcoin network is based in China, specifically in regions that provide low-cost hydropower. While the cheap hydropower available in regions such as Sichuan have created enclaves of crypto miners, it has placed miners at the mercy of mother nature. The Sichuan dry season, according to miners interviewed by Chinese crypto platform 8BTC — resulted in the mothballing of more than 1 million ASICs. Miners interviewed by 8BTC in early March stated that, while cryptocurrency mining in Sichuan remains a lucrative business, the lack of sufficient hydropower during the dry season caused a significant drop in the hash power generated in the region. Hydropower generation in Sichuan is subject to significant seasonal fluctuation — during dry season, which runs from October to April, grid power must be compensated by more than 7 percent to balance the lack of hydropower. The wet season, which runs from May to September, provides the Sichuan grid with over 3.331 billion kWh, an attractive prospect to miners seeking to minimize energy overheads — wet season energy prices can fall as low as 0.08 yuan per kWh, or $0.01 per kWh. The upcoming wet season will bring millions of ASIC units back online which, while relatively older compared to the latest generation of ASICs, will still result in a significant dump of hash power onto the Bitcoin network. Ebang Plans Large-Scale Hardware Deployment The reactivation of more than 1 million mothballed ASICs isn’t the only significant hardware movement that is set to disrupt the mining industry during the first half of 2019. Mining hardware giant Ebang has recently revealed plans to produce and distribute 400,000 ASICs during the year. As one of the top manufacturers of mining equipment in China and the third-largest mining equipment manufacturer worldwide, Ebang has been heavily affected by the extended Bitcoin price squeeze. Despite announcing significant decreases in revenue and gross profit for Q3 2018, Ebang shipped over 300,000 units in the first half of the year — more than 2.5 times the total amount of ASICs the manufacturer shipped in 2017. WIth Bitmain suffering from a failed Bitcoin to Bitcoin Cash diversification attempt and a $500 million net loss in Q3 2018, Ebang appears to be establishing a position that will allow it to take advantage of the relative weakness of it’s primary competitors. With the Bitcoin halvening set to occur next year, and mining profits rising, now is a critical time for major mining pools to invest in new hardware — Ebang’s 400,000 unit deployment appears to be timed to capitalize on the impeding hardware rush.