Can Bitmain Avoid the Bear?
According to an audit by KPMG, Bitmain made $742.7 million in profit during the first half of 2018. Surprising as it is, the audit predicts more positive numbers. As CNBC reports, the audit is a precursor to the plans to go public on Hong Kong Stock Exchange.
This year is particularly challenging for the cryptocurrency ecosystem. Digital currency prices are fluctuating wildly with major drops in value. Bitcoin is currently 53% lower in value compared to last year. However, the slump is worse in the altcoin sector, with Ethereum dipping almost 80% at one time in the trading cycle. The poor performance of the cryptocurrencies implies a tough business environment for manufacturers of crypto mining hardware. This is the reality as Bitmain files IPO plans.
Bitmain is one of the leading chip makers in the cryptocurrency sector. In fact, the Chinese company takes the largest share of mining hardware produced in the market. Like any other cryptocurrency company, Bitmain is experiencing poor revenues. In fact, there are reports of many miners going out of business due to high mining prices. It is a fact that mining rigs consume a lot of electricity. Therefore, many local authorities have put in place measures to ensure miners pay higher rates. However, there are other authorities that put a temporary moratorium on the business of crypto mining altogether. All this is bad for companies like Bitmain. In fact, the CryptoCoin reporter revealed in August that many of the mining hardware companies were making losses. Nonetheless, the companies announced plans to go public. In the report, CryptoCoin reporter said:
“Bitmain is aiming for a US$3 billion IPO after it files its plans next month. According to market estimates by analysts, the company has the lion’s share of the mining rig market. In addition, Bitmain runs an account where it mines Bitcoin and other major altcoins.”
Balance Sheet Shows Heavy Crypto Investment
Further, the Business Insider details that majority of the company’s revenues come from mining rig sales. Specifically, “94% of sales come from selling mining hardware sales.” The publication further details that the company boasts over 80,000 customers including individuals and companies. However, the latest bear run in the prices of crypto will definitely eat into Bitmain’s profits. The company is said to have significant assets in Bitcoin Cash and Bitcoin. Given their substantial dip in value, the company is definitely suffering. In addition, some countries like Vietnam banned the import of mining rigs from China. These and other factors may adversely impact Bitmain’s annual revenues and future share prices.