Bitmain, the Bitcoin Mining Kingpin, has Curious BTC/BCH Strategy that Could Doom Them
Pretty much everyone in the crypto world is aware of the fact that, to successfully deal in cryptos, you need a proper strategy. This especially goes for various companies, used to making a profit from the popularity of this technology.
One such company, of course, is Bitmain Technologies Ltd. This is a Chinese firm that is among the largest, if not THE largest producer of crypto mining rigs. Apart from that, Bitmain also creates crypto mining chips, and it is in control of almost half the Bitcoin mining power on a global level. Obviously, the company knows what it is doing, and it does it pretty well.
Now, the firm is going toward an IPO, in the middle of the recent market crash. So far, there were a few of its financials leaks, which may help with deducing its business model. For example, the first one seems to have come from Blockstream Corp.' Chief Strategy Officer, Samson Mow. There is also BitMEX's BitMEX Research, among others.
Crypto mining losing popularity?
One thing that pops up is the fact that, for all that it is doing, Bitmain is getting BTC and BCH payments. Even if it doesn't get paid in cryptos, it uses cash to buy them. Back in March of this year, only $105 million of the company's assets were in fiat currencies. On the other hand, they held as much as $1.17 billion in various cryptos. Additionally, as much as 54% of its non-crypto assets are dedicated to inventory and prepayments for Taiwan Semiconductor Manufacturing Co., its chip maker.
According to the chip maker's public comments, the demand for crypto mining chips has dropped significantly in 2018. This indicates that at least a part of Bitmain's orders won't actually go through.
To get a better picture of the situation, we should look at the crypto assets and inventory together. Right now, mining Bitcoin is nothing but a race, and a lot of people have already lost. The mining of the coin can get expensive, and many are holding on only so that they can make at least some profit. However, as the price of BTC and BCH goes down, so will the value of the mining rigs and chips.
This threatens to leave Bitmain in a serious problem, and the company will have to start accepting more money in cash, instead of in cryptocurrencies. While this won't solve its problems, it is still a start, especially since additional problems are expected to arrive as well.
In the end, many are finding Bitmain's actions to be unusual and difficult to understand at some point. Whether the company has a plan or not still remains to be seen.