Can Bitmain rise again? The crypto scene changes so quickly. It seems like just a moment ago that Bitmain, the Chinese company that makes specialized chips for cryptocurrency mining, was on top of the world. But few firms have been hit harder by last year's crash in coin prices, and the ensuing bear market—also known as "crypto winter"—that has characterized the industry for the past several months.
On Tuesday, Bitmain acknowledged that it had let its application for an initial public offering on the Hong Kong stock exchange expire. It said in a blog post that it would try again at an "appropriate time in the future." The company's rapid contraction has mirrored that of the broader industry that has sprung up around Bitcoin and other blockchain networks. But Bitmain is still betting it can get its mojo back, thanks to an upcoming change to Bitcoin's protocol and the company's foray into the field of artificial intelligence.
During the boom times of 2017, Bitmain seemed like the blockchain world's first dominant company. Its Antminer S9 mining rig accounted for nearly 60% of all bitcoin mining hardware shipments, and the company generated $2.3 billion in total revenue. On top of that it was using its own chips to mine Bitcoin and other cryptocurrencies as their prices continued to soar. Venture capitalists were captivated: by the time it applied for the IPO last September, Bitmain had already raised almost $800 million from high-profile VCs and Singapore's state-owned investment firm Temasek.
Things started to turn sour for Bitmain well before crypto winter set in. The price of Bitcoin fell dramatically in 2018, from nearly $20,000 in January to around $6,500 in September. In that time span, the selling price for Bitmain's S9 miner also collapsed, from more than $6,000 to just $250. In November, coin prices took an especially steep nosedive, and they still haven't recovered. Since December, the company has cut at least half of its 3,000 jobs, according to an investigation by the South China Morning Post.
Bitmain has also struggled to keep its technological edge, and upstart competitors are nipping at its heels. A lot is now riding on its next generation miner, which is supposed to be released by the end of the year. The rig will feature Bitmain's new seven nanometer chips, which it says will make mining substantially more energy efficient. It also wants to compete in the market for specialized AI chips. Late last year, it released its first product in that area, under the brand name Sophon.
According to the same South China Morning Post report, Bitmain may also be betting big on another Bitcoin rally, which it expects to occur during the run-up to the currency's next "halving." Projected to happen in May of 2020, halving is when the Bitcoin software automatically cuts the reward that miners receive in half. It occurs every 210,000 Bitcoin blocks—roughly every four years—and the price has increased in the year leading up to each of the previous two halvings.
Bitmain's blog post says the IPO application process has made it "more focused on things that are core to our mission." But unless it really can break out as an AI chipmaker, Bitmain's business fortunes will still be tied to the volatile price of Bitcoin. We've already seen how that can work out.
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Loose Change
Fill your pockets with these newsy tidbits.
- The London Metal Exchange is backing a project to build a system for tracking global metals on a blockchain. (Financial Times $)
- A study of 216 cryptocurrency exchanges by a startup called Coinfirm has found that nearly 70 percent do not have "complete and transparent" procedures for complying with regulations that require them to know who all their customers are. (CoinDesk)
- It turns out that Stellar, now the eighth-most valuable cryptocurrency, discovered and quietly patched a dangerous software bug back in 2017. (Messari)
- Joe Lubin, founder of blockchain-focused investment firm ConsenSys, says this year the firm will proceed with several so-called consumer token offerings, or "CTOs." Like ICOs, they will be public offerings. Unlike ICOs, they will supposedly involve tokens with heavy restrictions on how they are distributed and traded, and other features meant to discourage speculative trading. (Decrypt)
- New York financial regulators have granted a BitLicense, the state's requirement for blockchain companies to operate there, to Tagomi, a startup that offers crypto "prime brokerage" services for institutions like hedge funds. It's the 18th BitLicense New York has issued since 2015. (CoinDesk)
