A Chinese company subsidiary of Huatie, has been sold for $2 million after having a valuation of $25 million a year ago. The firm is called Huatie HengAn and the reason behind this plunge in its value is related to the drop in cryptocurrency mining profitability.
Company Losses 90% Of Its Value After Bear Market
As reported by the Chinese crypto site 8BTC, Huatie HengAn saw its value plunge from $25 million to just $2 million in just a year. The company purchased in the past 36,500 hardware machines labelled as “servers” from the firms Canaan and Ebang back in 2018.
These two firms are two of the most popular in the cryptocurrency market. They do sell hardware machines but not servers. Ebang and Canaan work in the crypto mining industry selling miners for virtual currencies.
The firm shows that they lost around $14 million in its subsidiary firm in 2018. However, by February 2019, the losses reached $23 million. Apparently, the parent company decided to measure these losses and sell the business to the market.
This shows that a large number of companies have been affected by the bear market in which virtual currencies were back in 2018. Several companies have reported losses while others had to stop operating. Even now, there are firms that are laying off employees since they are not able to pay for their salaries.
During the first half of 2018, mining companies did not seem to feel the bear market in the crypto space. The hash rate in the Bitcoin network continued to grow and expand despite the price fall during the same period of time. When Bitcoin reached $20,000, companies and individuals were very excited about the market moving to these values that decided to enter the mining industry.
However, this is a very competitive sector that requires companies to operate in a very efficient way.
This is why in November and December 2018, the crypto market plummetted and miners had to leave the industry. Hash rate fell and a few weeks later, difficulty in the network adjusted to allow miners to enter the market once again. Since that moment, hash rate in some networks such as Litecoin (LTC), improved substantially. Bitcoin’s hash rate has also been recovering since that moment.
Other cloud mining services such as Hashflare shut down due to the lack of profitability. For Bitmain, the largest mining company in the space, the situation became even worse with the price action experienced by Bitcoin Cash (BCH). Indeed, Ebang, Canaan and Bitmain abandoned their plans for Initial Public Offerings (IPO) in Asia. Meanwhile, GMO had to close its mining hardware enterprise.