Bitmain the Chinese giant of the cryptocurrency extraction, acquired the status of legend in the sector, with tons of mysteries surrounding its operations. The company is without a doubt one of the most profitable cryptocurrency companies in the world. But it seems that Bitmain is falling out of favor
A report by investment research firm Sanford C. Bernstein & Co. suggests that Bitmain loses its technological advantage over its competitors in the production of cryptocurrency mining chips. According to analysts, while Bitmain still controls up to 85% of the cryptocurrency mining equipment market, other companies such as Canaan Inc. and Ebang International Holdings Inc. are catching up
"The Beijing-based company, co-founded by 32-year-old billionaire Jihan Wu, may need to reduce the value of its inventory as rival mining machinery makers catch up." " Taiwan Semiconductor Manufacturing Co., which produces chips designed by Bitmain, should ask the company to make full prepayments and not to add capacity solely for [cryptocurrency]."
It should be noted that Bitmain manufactures the majority of its profits by selling mining equipment. Other minor sources of its revenues include the operation of the cryptocurrency itself, the management fees of its mining pools and the leasing of mining energy through cloud services.
However, if the Bernstein Report's claims are true, it would explain why Bitmain has taken radical measures recently. Bitmain was the first to raise controversy in March by selling his $ 12,000 mining equipment to Monero (XRM) and other coins, knowing that this equipment will become obsolete.
Over the last year, Bitmain seems to have favored the sale of mining equipment to a more diversified portfolio. She's also interested in crypto-currency mining herself. The company announced a $ 500 million cryptocurrency mining farm in Texas earlier this month.
Bitmain also invested heavily in EOS  Circle cryptocurrency payments company Opera  and even incubated a decentralized solution. exchange DEx.top. In fact, according to the company's CEO, Jihan Wu, up to 40% of Bitmain's profits over the next five years could come from the sale of AI chips instead of the cryptographic operating equipment.
Whereas Bitmain focused resolutely on the manufacture of mining equipment until very recently, it is certainly surprising that it aims for such diversity in a short period of time. The IPO of Bitmain has also raised some concerns about its financial situation.
The highly anticipated IPO is expected to reach about $ 18 billion and investors seem to be becoming aware of it. Reports were published earlier this month that Softbank Group and Tencent participated in the pre-IPO of Bitmain. However, the two companies have now refused to participate in the IPO, raising doubts about the expected number of $ 18 billion for the IPO of Bitmain.
The financial liquidity of Bitmain was also questioned when its pre-IPO investment documents showed that the company holds a significant portion of its money in Bitcoin Cash (BCH).
According to the record of pre-IPO investors from Bitmain, they sold most of their #Bitcoin for #Bcash . At $ 900 / BCH, they have debited half a billion dollars over the past three months. If the developers of Bitcoin Core do not reveal the vulnerability of Bcash, they could erase a billion dollars from their balance sheets. pic.twitter.com/9BMywdvvby
– Samson Mow (@Excellion) August 11, 2018
Blockstream's Director of Strategy (CSO), Samson Mow, points out that Bitmain bought the BCH for $ 900 / BCH. If she now tries to sell the BCH that she holds, it would drastically lower the price of cryptocurrency. Therefore, the investment of Bitmain is not quite liquid.
The announcement of Bitmain regarding the IPO was a surprise and was surrounded by controversy. It seems likely that, as Bernstein's report shows, Bitmain loses its monstrous control over the mining sector of cryptocurrency, forcing it to venture into other companies.
Posted on August 22, 2018 – 12:55 UTC