Guosheng Securities: Bitdeer officially announces self-developed mining machines, expecting more mining companies to join the game in the future.

Zhitong App learned that Guosheng Securities released a research report stating that on January 5th, Bit Deer announced on its official website that it has independently developed mining machines and has placed an order with TSMC to purchase chips specifically designed for mining. This batch of chips is expected to be delivered in the first quarter of 2024 for further design verification and prototype testing. The report pointed out that after nearly two rounds of bull and bear market fluctuations and policy cycles, the Bitcoin mining industry has all gone global. With the approval of the U.S. Bitcoin ETF, the rise of AI computing power, and a new round of semiconductor process upgrades, mining companies are once again at a new starting point, with integrated integration becoming a common strategic approach.

Key Points

The income from Bitcoin mining is mainly affected by mining difficulty and electricity costs. The mining difficulty and coin price of Bitcoin's entire network are the same and uncontrollable for all miners. Miners can only increase their income by expanding their own computing power. The mining machine is the main means of production for miners. The energy efficiency ratio of mining machines (J/TH, power consumption per unit computing power) can simultaneously affect mining income and costs. For mining machines with the same computing power, the mining income is the same, but for machines with lower energy consumption ratios, the electricity costs are lower, theoretically resulting in higher mining income.

The halving is approaching, mining costs will double, and high-performance mining machines are crucial. Bitcoin halving refers to the halving of the number of Bitcoins mined as rewards for confirming transactions. Since the launch of Bitcoin, halving has occurred three times, with the next halving expected to take place in April 2024. For miners, Bitcoin halving means a halving of income, resulting in a doubling of costs for the same income. The key to controlling costs lies in controlling mining machine electricity costs, with significant room for improvement in machine performance (reflected in energy efficiency ratio J/TH). Currently, the overall level of mining machines from mining manufacturers varies, leading to significant differences in computing costs. Considering the imminent sharp increase in costs brought about by Bitcoin mining halving, only more efficient and advanced mining equipment can ensure mining efficiency and prevent machines from being phased out of the market.

As the coin price rebounds from the bottom, the mining market is starting to recover, mining machine prices are rising, and the trend of centralized computing power is emerging. The coin price is the "ultimate factor" affecting miner income. In 2023, the coin price rebounded from the bottom. As of February 4, 2024, the price of Bitcoin has risen from $16,000 on November 11, 2020, to $43,000, an increase of 175%. The overall coin price has moved out of the bear market, confidence has increased, the mining market is recovering, and mining machine prices are also rising. With the increase in mining difficulty and the decrease in Bitcoin production, traditional retail miners are leaving the market, leading to a trend of institutionalized miners.

Self-developed mining machines are expected to reduce costs and increase efficiency, and more mining manufacturers are expected to enter the self-developed mining machine market in the future. Independently developing mining machines is beneficial for further expanding company operations and helps companies cope with the upcoming halving and rising mining machine prices. Since mining machines are related to mining manufacturers' income and costs, and the upcoming halving and rising mining machine prices are issues that all manufacturers will face together, we expect more mining manufacturers to start developing their own mining machines. Currently, due to issues such as mining machine procurement batches and product upgrades, the overall efficiency levels of mining machines from various manufacturers vary. Under the demonstration of Bitdeer's self-developed mining machines, manufacturers with originally high energy efficiency may seek to surpass through self-development, while manufacturers with originally low energy efficiency may also consider self-development to ensure a leading edge.

Investment Advice: It is recommended to pay attention to: Bitdeer, MicroStrategy (MSTR.US), Bitcoin miners (MARA.US), Bitcoin mining machine manufacturer Canaan Inc. (CAN.US), cryptocurrency exchange Coinbase (COIN.US), and Hong Kong-based cryptocurrency exchange OSL Group (00863).

Risk Warning: Risks include a decline in Bitcoin prices, stricter regulations on Bitcoin by various countries, unexpected power supply shortages, and lower-than-expected computing power upgrades.