According to asset management firm. Sanford C. Bernstein and Co., the cryptocurrency mining chip-making giant, Bitmain Technologies Ltd., could be unable to retain its technological advantage in the industry.
In spite of the previous year’s sterling performance, analysts at Bernstein and Co. believe Bitmain’s prospects do not look very bright. Primarily, their report argues, this is due to declining prices in cryptocurrencies, the company’s bitcoin cash (BCH) investments, and the emergence of stiff competition.
Significantly, this report comes in just weeks before the company’s September Initial Public Offering (IPO) on the Hong Kong Stock Exchange.
Mark Li, the analyst who headed the research, cautioned Taiwan Semiconductor Manufacturing Co., the producers of Bitmain’s mining chips, to take prepayments in full and also desist from expanding specifically to meet growing demand for cryptocurrencies. What motivates the caution is Li and his team of analysts’ doubt about the ability of chips from Bitmain to perform as favorably as they have so far, arguing in particular that:
“The competitiveness of Bitmain’s chips is in question.”
Crypto Bear Market, Risk Associated with Holding Bitcoin Cash, Competition
So far, 2018 has been far from a stellar year for the cryptocurrency space as prices of crypto-assets across the board have dropped since January. This slump has led to less interest in cryptocurrencies as well as decreasing demand for mining hardware. As the Bernstein analysts explained, Bitmain’s prospects do not look bright at a time when there is declining demand for their main products.
Bitmain is said to be the owner of a huge percentage of all bitcoin cash coins in existence.
Jihan Wu, CEO and co-founder of Bitmain, led his company in throwing its weight behind the Bitcoin Cash hard fork of Bitcoin in August 2017, in an attempt to make the fork “the real Bitcoin”. For some time, the only cryptocurrency Bitmain was accepting as payment for their miners was Bitcoin Cash. Bernstein and Co. pointed out that the failure of the fork to perform price-wise is, therefore, a substantial problem for the company.
Samson Mow, a prominent influencer in the cryptocurrency community, stressed the same point on Twitter - earlier this month:
According to the Bitmain pre-IPO investor deck, they sold most of their #Bitcoin for #Bcash. At $900/BCH, they've bled half a billion in the last 3 months. If Bitcoin Core devs didn't disclose the Bcash vulnerability, it could've wiped a billion dollars off their balance sheets. pic.twitter.com/9BMywdvvby— Samson Mow (@Excellion) August 11, 2018
According to Bernstein and Co., competitors like Canaan Inc. and Ebang International Holdings Inc., are slowly chipping away Bitmain’s dominance in the mining hardware production space. Both companies are also set to be listed on the Hong Kong Stock Exchange.
In other news affecting Bitmain, several top companies in Asia, rumoured to have been involved in the Bitmain pre-IPO, have come out to disassociate themselves from the investment. Last week,, SoftBank Group, the Japanese conglomerate, came out to deny earlier reports that they were involved, while while a managing partner at DST Global has also clarified that his firm has not invested in Bitmain. Tencent, another technology giant in Mainland China, is also said to have denied involvement in the Bitmain IPO.
Opinions on social media suggest that neither the report from Bernstein nor the comments from Softbank and Tencent look good for the world’s largest manufacturer of crypto-mining hardware.