Bitmain is a Beijing based company that is responsible for manufacturing the vast majority of all ASIC mining devices. It is run by a 32-year-old billionaire, Jihan Wu. While Bitmain designs and sells the powerful custom chips used to mine cryptocurrencies, but it makes money from mining too. In Gold Rush parlance, it sells the pickaxes and owns and works the mines. Its market share in the selling chips and mining equipment is 80 percent; in the mines is 40 percent.
Bitmain runs the biggest Bitcoin mining collectives, according to June 2018 data by Fortune. However, the company is under near constant criticism from a wide variety of sources within the cryptocurrency community. This time it is because it might be cashing out. It is rumored to have $40 Billion plan to cash out of Bitcoin.
‘We aim to quickly deliver innovative and competitive custom hardware solutions to help the community’, says the website. Bitmain is able to provide the most power effective bitcoin mining solution on today’s market. It gained market share through a well marketed strategy of offering a 24 Month warranty to all of their products.
Another success factor has been that most Bitmain devices are capable of mining multiple cryptocurrencies. For example, the S9 can mine both bitcoin and bitcoin cash. This is because they share the same hashing algorithm, SHA-256. This helps in risk aversion for miners. This also allows it to remain profitable when it goes through the cash out.
Out for its Own Blood
Despite this year’s crypto plunge, Bitmain has earned plenty of money from all sides of the Bitcoin trade. The company has remained influential in the developer and miner circles, so much so it is still seen as a driving force behind the 2017 Bitcoin fork or spin-off, bitcoin cash. It aimed to displace the original and created a backlash in the process.
An IPO could value Bitmain at $40 billion, or 20 times this year’s unverified forecast earnings of $2 billion. That wouldn’t be far off the earnings multiples of established chip-makers Advanced Micro Devices Inc. and NVIDIA Corp., whose own share prices have been boosted by the popularity of their chips with the crypto crowd.
Even assuming that the inflated Bitmain multiple and 2018 earnings figure are true, the bigger question would be how much profit it might expect to make in a future crypto market that’s far more stringently regulated. Potential investors would want to be reassured that the cratering bitcoin price isn’t a harbinger of worse. It has already been a target of pressure groups that demand eco-friendly methods.
To The Moon
The most interesting part of a Bitmain pitch might be its shift into non-crypto terrain, diversification will help itself to insulate from the market volatility. The company has been using its chip-design expertise to expand into artificial intelligence, and company documents estimate this will make up 40 percent of its revenue in the next five years. Although artificial intelligence is equally risky and a relatively newer terrain, it will make a powerful duo combined with cryptocurrency if done right. Wu told Fortune magazine in June that this business would be similar to Google’s AI-focused tensor processing units.
Despite international reservations on the Chinesen owned crypto-powerhouse raising money to spend on advanced AI hardware and compete with silicon valley, it seems working well for all global players involved so far. Even if Bitmain is creating tech jobs in the U.S., and backed by U.S. venture capital funds, it would probably be listed in Hong Kong. While this can be a cause of agony for the nationalists, it is still deemed desirable.
Very much still in the rumor and speculation category, including the listing itself but hopes around the IPO are high. It appears like a straightforward play on digital currencies, might in fact end up as an attempt by a leading Chinese entrepreneur to cash out of the bitcoin craze and fund some leading-edge tech instead. However, it still sounds too ironic since China has been far stricter on crypto trading than most western nations.
For investors still nursing losses from bitcoin’s wild ride, the prospect of another tech moon shot may seem a bit too soon and too eager. This could end up the first useful real-world thing to emerge from the bitcoin bubble too. It all depends on how Bitmain decides to play its card in face of the international crypto climate.