Bitmain has been a prominent figure in the headlines of 2018, yet have little to show for it at the close of the year.
The cryptocurrency mining giant was responsible for supplying more than 50 percent of all ASIC mining equipment at one point during the 2017 bull market, capturing billions of dollars in revenue. However, the subsequent downturn in prices over the past year has put the company under immense pressure.
Every Meteoric Rise, Falls
Bitmain had allegedly made over $1 billion in profits during the first half of 2018, following the meteoric rise of the cryptocurrency market at the end of 2017. However, their trajectory turned relatively quickly due to what some might see as key strategic decisions.
First, as it was widely reported, the company switched their focus from Bitcoin (BTC) to Bitcoin Cash (BCH) in Q2 of 2018, increasing holdings of BCH and selling their BTC. At the same time, Bitmain embarked on the road to get listed on a traditional stock exchange.
Bitmain began preparation for an IPO on the Hong Kong Stock Exchange during Q2 2018. As this process requires companies to file official documents, there have been plenty of headlines (both positive and negative) on what is going on behind the curtains.
As the bear market unfolded and the hash wars for Bitcoin Cash began, Bitmain couldn’t have found itself in a worse position. Any hopes of an IPO at the end of 2018 were quickly squashed with rumors coming from the Hong Kong Stock Exchange confirming their reluctance towards approving an IPO for a cryptocurrency company.
During the latest filing, documents revealed Bitmain’s financial performance for 2018 through Q3 (sans Q4) booking $3 billion in revenue and $500 million in profits.
The reveal suggests that the company might have taken a $500 million loss in Q3 2018 if the reported figure of $1 billion in profits through Q2 2018 is accurate.
Bitmain Adapting to New Market Conditions
Bitmain has been swarmed by negative headlines in the past few months, but the company looks motivated to bounce back. Recognizing the financial pressures of the bear market, the company has made several changes to its operations and has had some of its offices closed and staff laid off.
Another internal restructuring move is the step-down of Jihan Wu as CEO of Bitmain, and being replaced from inside the company. On the operational side, Bitmain has also just announced its newest mining chip.
The company announced the news in a post published on Feb 18, on its official blog. According to the statement, the new BM1397 chip offers faster and cheaper cryptocurrency mining.
Taiwan Semiconductor Manufacturing Company (TSMC), Bitmain’s chip supplying contractor, manufactured the chip using the former model’s 7-nm FinFET process. The new generation of 7-nm chips is designed for the SHA256 mining algorithm, which is used by Bitcoin and Bitcoin Cash.
According to the company, the new mining processor provides significant improvements in power efficiency from the earlier 7-nm chips released in November of 2018.
The post also revealed that the new upgraded 7-nm chips would come as part of the upcoming S17 and T17 Antminer models. However, there is no schedule for when the new miners will be available for order or ready to be shipped.
Negative Headlines to Battle
While there is some positive news on the horizon for Bitmain, the lack of details around the newest chip and its release schedule raises doubts over the timing of the announcement. The chip reveal could be an attempt at diverting the public’s attention from the published figures of a potential $500 million loss in Q3, and quite possibly more in Q4 2018.
There are also unverified reports surfacing on Twitter that Bitmain’s cryptocurrency balance sheet is down almost 90 percent in value from a year ago. Moreover, the company’s cryptocurrency holdings have dwindled significantly as it was forced to sell to cover losses and expenses.
Bitmain reportedly had to sell 500,000 BCH over Q3 and Q4 2018 to cover losses, but the reports state the company still holds around 6,000 BTC and 750,000 BCH.
While Bitmain had captured a great piece of the cryptocurrency market, their trajectory is showing that no one is safe from the bear market. In fact, larger companies are usually more susceptible to the negative side effects because they are not as flexible and responsive as smaller teams.
Although Bitmain’s current situation is not ideal, it appears that the team is processing the situation and is actively taking measures to contain the long term negative impacts.
Is Bitmain capable of mastering its own resurgence from the inside? Will it need the help of a bull run to fully recover? Tell us your thoughts in the comments below!