Chinese cryptocurrency hardware manufacturer Bitmain seems to be bouncing back after a streak of dismal reports. Earlier this week, a local industry blog revealed that the mining giant has accumulated over $300 million in revenue so far this year and is rewarding employees with massive bonuses on Labor Day.

Bitmain has since confirmed that information to Cointelegraph but ignored additional questions. Therefore, how does a mining company go about scoring profits amid the pandemic and the Bitcoin halving frenzy, the latter of which is said to shake things up for miners? 

A brief recap of Bitmain’s fluctuations

Bitmain was founded in 2013 by Jihan Wu and Micree Zhan. At the time, Wu was a private equity fund manager, while Zhan was raising funds for his TV streaming startup. Wu had allegedly spent all his savings on Bitcoin (BTC) and was looking for a way to accumulate more of the asset through industry-scale mining.

In November 2013, Wu and Zhan developed an ASIC chip that allowed to mine BTC at full capacity, thus revolutionizing the industry that had been fully reliant on less-efficient CPU setups. Bitmain’s sales soon skyrocketed (despite some turbulence caused by Mt. Gox) and by mid-2018, the company was valued at $15 billion after reportedly closing a pre-initial public offering funding round. 

Around the same time, Bitmain announced its plans to expand into the field of artificial intelligence as the Chinese government began applying more pressure to the mining industry. Apparently, it was Zhan’s idea to open up an AI arm, while Wu was not fully supportive of that direction and even reportedly once called Zhan’s plan “crazy” during an internal meeting.

As Bitmain began preparing for an IPO, the company hit another rough patch due to the crypto winter that was intensifying at the time. As a result of the collapsed BTC price, Bitmain purportedly sold a substantial amount of its mining equipment at a loss throughout 2018, hoping to secure the majority of the market share for better times. Additional reports suggested that the mining giant introduced austerity measures that included massive layoffs and the suspension of its colossal $500-million blockchain data center and mining facility in Rocksdale, Texas. 

By January 2020, Bitmain’s market share by hash rate had ostensibly dropped from around 75% to 66%, while an additional report came out suggesting that the mining titan is planning to reduce its workforce by another 50% prior to the upcoming Bitcoin halving — which will cut the amount of BTC awarded to miners by half.

On top of everything else, Bitmain’s plan to go public via the Hong Kong Stock Exchange eventually stalled, as companies that were previously listed as Bitmain investors began denying their involvement in the IPO.

Wu vs. Zhan

In addition to the aforementioned problems, the company has found itself in the midst of an ongoing legal battle between two of its co-founders. The issue sparked in October 2019 when Wu, who abandoned his post as CEO of Bitmain in 2018 to take on a non-executive role on its board, suddenly ousted Zhan, who was the firm’s partner and chairman at the time, from Bitmain.

According to the alleged transcripts of an internal meeting that supposedly took place one day prior to the incident, Wu told Bitmain employees that he was going to take matters into his own hands and improve Bitmain’s declining share of the Bitcoin mining pie. Additionally, he forbade staff to have any interaction with the ex-senior executive, threatening to fire those who don’t conform, and took over the company as a legal representative.

Zhan started to fight back, filing two lawsuits against Bitmain. He submitted the first one in December 2019 to a court in the Cayman Islands where Bitmain Beijing — the firm’s holding entity — is registered, while the second lawsuit was brought in last month against the company’s AI subsidiary, Fujian Zhanhua Intelligence Technology, in a Chinese court. “If someone wants a war, we will give them one,” Zhan reportedly claimed, arguing that he owned 36% of the company’s equity.

In January, Wu handed over the company’s legal representative post to Luyao Liu, the CFO of Bitmain. However, the Beijing Haidian District Bureau of Justice has recently overruled that appointment after Zhan had appealed the decision in February. It was a partial victory for Zhan since the court didn’t uphold his request to appoint him as Bitmain’s legal representative but disrupted the distribution of power within the firm by Wu.

The $300-million turnaround

Despite the legal problems, it looks like the winds are finally changing for Bitmain. On April 29, a Chinese industry blog published a report suggesting a number of positive changes for the mining giant. Bitmain later confirmed the information to Cointelegraph that it had earned over $300 million in the first four months of 2020 and regained some market share, as it opened four new mining facilities and saw the hash rate increase in two of its mining pools.

Bitmain has also confirmed that it will be rewarding its employees with individual bonuses of up to 70,000 yuan (about $9,900) on Labor Day, which is scheduled for May 1. The bonus payments would amount to “millions of yuan.” 

Additionally, Bitmain has streamlined its AI department’s operation. Namely, the company has developed the software for image recognition of rare birds to assist wildlife protection agencies, among other AI projects. Philip Salter, the head of mining operations at Genesis Mining, is not surprised by the company’s performance. Salter told Cointelegraph:

“They have the very profitable S17+ product and, of course, now the new S19. Bitcoin prices have been low, which reduces Bitmain’s opportunistic prices. And this means that large miners could have placed large orders to stock up on equipment at low prices!”

The COVID-19 pandemic, which has reportedly dwarfed China’s mining operations and forced some facilities to shut down, doesn’t seem to be stopping Bitmain either. In a recent comment for Cointelegraph, the company’s representative said Bitmain is following professional advice for dealing with the pandemic while continuing to sell its Antminer rigs. Salter suggested that Bitmain could have even reached an agreement with the Chinese government to continue its operation during the lockdown:

“Who knows, maybe Bitmain had some special deals with the government to continue production of miners? I would not be surprised if high-value companies like Bitmain get exceptions from the rules.”

As for the upcoming Bitcoin halving, it is not likely to cause Bitmain any serious financial problems — if anything, it will drive off weaker actors, as Mark D’Aria, the CEO of Bitpro Consulting LLC, suggested in an email conversation with Cointelegraph: 

“The halving is going to be toughest on the hardware manufacturers producing the least efficient hardware, and on the miners with the least efficient operations. Difficulty will adjust to a new normal quickly, and the weakest of both will be flushed out. Once hashrate has adjusted, we will definitely see some clear winners and losers.”

The halving will create margin pressure on many miners if Bitcoin remains below $9K, primarily the inefficient ones, Matt D’Souza, the CEO of crypto mining hardware broker Blockware Solutions, told Cointelegraph, elaborating:

“A majority of old generation and mid-generation equipment is going to have to shut off. If Bitcoin is at $9K or below, you can expect about 20%–30% of the network to shut off. If $9K remains for several weeks beyond the halving, it will create a health cleanse for the network.”

Alireza Beikverdi, the CEO of crypto exchange software firm bitHolla, is also confident about Bitmain’s future, as he recalled his visit to the company’s headquarters in a conversation with Cointelegraph:

“Bitmain has a big monitor in the middle of their office, and you would expect it to show Bitcoin hash rate, their sales stats, or maybe their new models, etc. But, instead, it’s only displaying Bitcoin price.”

Price volatility can make a big difference for mining companies and their future operations, Beikverdi continued, meaning that it is considered one of the most important metrics. Bitmain controls two large mining pools, Antpool and, which account for over 30% of the entire Bitcoin network. “They have multiple business streams that are not really affected much by the pandemic as long as Bitcoin price stays strong,” Beikverdi summed up. 

Future plans: IPO in 2020? 

Bitmain has made strong statements against the backdrop of the recent good news. It has heavily criticized the Beijing Haidian District Bureau of Justice’s ruling in a statement, going as far as to argue that it has violated corporate laws. The firm has also reassured customers and investors that the results of the ongoing squabble between Wu and Zhan will not have any impact on Bitmain’s production or operation, while the AI arm will remain under the firm’s control. 

Should the court go ahead and register Zhan as the legal representative of Bitmain Beijing, the corporation will allegedly remain unfazed. Bitmain Beijing is just one of the more than 10 subsidiaries of Bitmain, it noted. 

Meanwhile, toward the end of 2019, the mining juggernaut quietly filed a Deutsche Bank-backed application for an IPO with the United States Securities and Exchange Commission, meaning that it might continue its comeback by going public in the future — maybe even sometime later this year.