Acting on its planned venture into the crypto mining business, The9 has Monday Jan 25 announced that it entered five legally binding Memorandum of Understanding with five Bitcoin mining machine owners who are already deployed in Xinjiang, Sichuan and Gansu in China to purchase their machines. 

The purchase, which is to be through an exchange with the issuance of Class A ordinary shares, would see The9 own 26,007 Bitcoin mining machines to produce with a total hash rate of approximately 549PH/S, or about 0.36% of the global hash rate of Bitcoin, the Internet company states.

It had planned to build mining machines that will contribute 8% to 10% of key mainstream cryptocurrencies and become one of the world’s largest companies in terms of hash rate, according to its CEO Jun Zhu.

Last month – with the help of investors including former Canaan directors, Jianping Kong and Qifeng Sun – The9 reported its plan to venture into crypto mining with a new wholly-owned subsidiary NBTC Limited handling its blockchain and cryptocurrencies business.

Shares of the Shanghai-based online game operator immediately gained about 25% after the company made the announcement of the five MOUs. 

The news comes as supply of rigs from China has been put under immense pressure following a global chip shortage that is affecting the production of mining machines causing prices to soar as a surge in the cryptocurrency drives demand.

It causes a scramble which is pricing out smaller miners and accelerating an industry consolidation that could see deep-pocketed players profit from the bitcoin bull run, Reuters reports, as many major miners continue to scour the market for rigs even at higher prices.

Major players’ longing appetite for Bitcoin has been gaining mainstream interest of late even as the cryptocurrency’s supply continues to dry up. Marathon Patent Group Inc., one of the largest Bitcoin mining companies based in North America, is the latest to announce its purchase of 4,812.66 BTC at an aggregate price of $150 million.

Marathon has contracted to purchase 103,060 miners but are not expected to be delivered and fully deployed until the end of Q1 2022. If all miners were operational today,they could produce approximately 55 to 60 bitcoins per day based on the Bitcoin network’s current difficulty rate.

Their purchase of the bitcoin, in the meantime, is to help the company leverage its cash on hand to invest in Bitcoin now so as to transform its potential to be a pure-play investment into a reality, its CEO, Merrick Okamoto, said.

The9’s market entry timing matters for its profit outlook and how it would be affected should the price of Bitcoin stays low after seeing a drawback recently. JP Morgan Chase & Co strategists believe Bitcoin may not bounce back above the $40,000 level seen earlier this month as there is now a faltering demand for the biggest fund tracking the digital asset.

Bloomberg reports that the strategists think the pace of flows into the $20 billion Grayscale Bitcoin Trust “appears to have peaked” going by four-week rolling averages, having slid 22% over the past two weeks through Jan. 22, outpacing a 17% drop in Bitcoin in the same period.

It adds that a separate analysis by OKEx Insights’ Adam James found at least some long-term Bitcoin holders (or whales) and miners likely sold to institutional investors during the 2020 rally.

Meanwhile, the rest of the crypto market is reportedly growing faster than Bitcoin which, despite briefly dropping below $30,000 over the past week, still has its on-chain fundamentals remaining strong and likely to grow according to Glassnode.