{"id":21625,"date":"2018-08-14T21:47:24","date_gmt":"2018-08-14T21:47:24","guid":{"rendered":"http:\/\/ci027cfe7c000526c3"},"modified":"2018-08-14T21:47:24","modified_gmt":"2018-08-14T21:47:24","slug":"trouble-horizon-what-last-weekends-ruckus-means-bitmains-ipo","status":"publish","type":"post","link":"https:\/\/bitcoinmagazine.com\/business\/trouble-horizon-what-last-weekends-ruckus-means-bitmains-ipo","title":{"rendered":"Trouble on the Horizon? What Last Weekend\u2019s Ruckus Means for Bitmain\u2019s IPO"},"content":{"rendered":"
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Over the weekend, information surfaced that could suggest that mining giant Bitmain may be facing an uphill battle as it looks to launch an IPO on the Hong Kong stock exchange.<\/p>\n

Newly leaked public information reveals that, in its pre-IPO presentation to investors, Bitmain provided insight into its cryptocurrency holdings, which shows that Bitmain unloaded most of its bitcoin (BTC) to accumulate bitcoin cash (BCH) in its stead. In a snapshot of a slide from the original presentation, the leftmost column titled \u201cDigital quantity of money\u201d shows Bitmain\u2019s bitcoin supply decreased from 71,560 BTC to 22,082 from December 2016 to Q1 2018. Over the same period, its BCH holding increased to over 1 million coins. <\/p>\n

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Samson Mow, CSO of Blockstream, pointed out<\/a> that Bitmain has incurred half a billion dollars in losses through its BCH holdings over the last three months alone. Scrutinizing the company further, Mow pointed out that Bitmain chose not to disclose financial data for its Q2 inventory in 2018. The tweet<\/a> by Mow brings to light that Bitmain reported $1.24 billion in inventory for Q1 2018, while it has not mentioned any numbers for Q2 despite already being well into Q3, raising speculation that Q2 was omitted because the company may have realized a loss between $600-700 million<\/a>.<\/p>\n

In a recent Medium blog post<\/a>, a pseudonymous blogger by the name of Crypto Herpes Cat points out that these losses, and the lack of transparency surrounding its reporting, could have an impact on Bitmain\u2019s forthcoming IPO.<\/p>\n

Why This Matters<\/h3>\n

All this could spell concern for Bitmain\u2019s current and potential investors, although some investors have still expressed continued support<\/a> for the company despite the recent debacle. <\/p>\n

A recent twitter thread<\/a> by Vijay Boyapati, a software engineer at Peach Inc. and a prominent crypto blogger, argues that \u201cBitmain entered one of the worst trades of 2017\u201d when it chose to support bitcoin cash over bitcoin, going on to state that the mining giant is sitting on a such a large supply of the cryptocurrency that \u201cthey have no ability to exit its billion dollar position in BCash without a complete collapse in its price.\u201d<\/p>\n

As the evidence from the pre-IPO presentation suggests, Bitmain could be holding 5 percent of the total supply of bitcoin cash at a time when the altcoin is falling below its all-time lows. With market conditions like these, price stability is fragile, making it difficult for a large holder of any cryptocurrency to offload a large number of coins without severely affecting the price. Given its stash of bitcoin cash, Bitmain could risk tanking the price even further, something that would obviously be against its own interests.<\/p>\n

Another part of Bitmain\u2019s business is also struggling thanks to increased competition from competitors like GMO, Avalon and Ebang, who have started producing more efficient chips than the 16nm ones that Bitmain\u2019s S9 miner uses, according to Crypto Herpes Cat. <\/p>\n

Market saturation and an overall decrease in demand for miners during the prolonged bear market has caused Bitmain, the largest Bitcoin mining hardware<\/a> company, to incur what may be a substantial loss on its balance sheet. For instance, the antminer s9, Bitmain\u2019s latest and most sophisticated ASIC, once sold for $3,500; now, it\u2019s selling for $700 \u2014 a decline of over 80 percent. <\/p>\n

The majority of Bitmain\u2019s value, however, is derived from its treasure trove of crypto assets like bitcoin cash, as well as future cash flows from selling mining equipment. During the bull market that saw bitcoin rise to almost $20,000, the same speculative demand that drove prices and mining interest fueled the majority of Bitmain\u2019s business. But since bitcoin\u2019s price has retreated some 70 percent from its all-time highs, the demand for ASIC miners has decreased as well. <\/p>\n

Through multiple funding rounds in 2017 <\/a>and 2018<\/a>, Bitmain witnessed its valuation balloon to $12 billion, and its IPO valuation has it figured upward of $40 billion. <\/p>\n

Now, there is some speculation as to the motives behind Bitmain\u2019s IPO, including suggestions that they may be providing a way for Bitmain to right the ship by offloading onto retail investors. Since Bitmain\u2019s value was derived from its speculative business strategies, its IPO may be a way to sell part of its company at the high valuation they earned during the bull market, Crypto Herpes Cat suggests.<\/p>\n

How Did Bitmain Get Here?<\/h3>\n

Bitmain\u2019s support for Bitcoin Cash has lined up with its narrative since the original hard fork<\/a> in August 2017. Jihan Wu, CEO and co-founder of Bitmain, has sat alongside proponents like Roger Ver in defending it as the future of Bitcoin and money. <\/p>\n

More than this, as an unofficial continuation of Bitmain’s \u201cBIP148 contingency plan,\u201d Bitcoin Cash was effectively initiated by Bitmain, while Bitmain-affiliated mining pool ViaBTC realized the coin by mining its first blocks. Between ViaBTC and its other proxy mining pools<\/a>, Bitmain supported and mined bitcoin cash from its inception, accumulating a large number on top of what it had already received during the fork.<\/p>\n

Through its mining pools, Bitmain supported and mined bitcoin cash, accumulating a large amount on top of what it had already received as a result of the fork. Bitmain has also made substantial investments into projects supporting bitcoin cash, investing $3 million<\/a> into a bitcoin cash-powered, digital advertising platform. <\/p>\n

Bitmain has not responded to Bitcoin Magazine\u2019s request for comment at this time.<\/p>\n","protected":false},"excerpt":{"rendered":"

Over the weekend, information surfaced that could suggest that mining giant Bitmain may be facing an uphill battle as it looks to launch an IPO on the Hong Kong stock exchange.<\/p>\n","protected":false},"author":3425,"featured_media":21627,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[464,3298,3420,197,472,2799,2082],"class_list":["post-21625","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-asics","tag-bcash","tag-bip148","tag-bitmain","tag-hong-kong-stock-exchange","tag-ipo","tag-samson-mow"],"author_data":{"id":3425,"name":"Michael Taiberg","nicename":"michael-taiberg","avatar_url":"https:\/\/bitcoinmagazine.com\/wp-content\/uploads\/2024\/12\/michael-taiberg-promo-image-96x96.jpg"},"featured_image_url":"https:\/\/bitcoinmagazine.com\/wp-content\/uploads\/2024\/11\/trouble-on-the-horizon-what-last-weekends-ruckus-means-for-bitmains-ipo.jpg","_links":{"self":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts\/21625","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/users\/3425"}],"replies":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/comments?post=21625"}],"version-history":[{"count":0,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts\/21625\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/media\/21627"}],"wp:attachment":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/media?parent=21625"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/categories?post=21625"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/tags?post=21625"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}