2018 was a very disappointing year for the cryptocurrency market, especially towards the end of the year as prices plummeted from the heights of 2017. The falling prices adversely affected traders, crypto exchanges and even, mining operators and manufacturers of mining equipment. However, it would seem that the Chinese giant, Bitmain was more affected than most, so much so that presently, its future hangs in the balance.
Falling demand for mining equipment
Bitmain was the king of mining operations and has also long been a leader in the field of manufacturing mining equipment. In fact, so popular was its Antminer equipment that during the boom of 2017, they were often sold out and were found to being sold for triple the price on the black market. However, when Bitcoin and other cryptocurrency prices came tumbling down, so did the demand for their equipment.
An investment with no returns
That alone hasn’t contributed to Bitmain’s recent position. In fact, it can be argued that Bitmain’s struggles today can be attributed to how much it overextended itself in light of the Bitcoin Hard Fork and poured in more resources than necessary to develop Bitcoin Cash specific mining resources. Since the hard fork, BCH has largely encountered a bearish market and has seen a consistent downslide in value, which is why none of Bitmain’s considerable investment into BCH mining operations has returned any profits.
Bitmain has also been forced to lay-off several people, including many involved in developmental projects across the world. The BCH development teams were worst hit with a reported 85% lay-off rates but, other projects weren’t immune too. In fact, entire developmental projects in places such as Israel and Amsterdam have been shelved as they were considered auxiliary and were deemed detrimental to the scalability and long-term sustainability of all operations.
Reigning uncertainty about IPO plans
Uncertainty over Bitmain’s IPO plans hasn’t helped the recent fortunes of the company either. While plans for Bitmain to go public through an IPO and join the Hong Kong Stock Exchange have long been in the works, there still remains regulatory uncertainty over the same. The recent statements by the CEO of the Hong Kong Stock Exchange at Davos are unlikely to alleviate worried investors. He said,
“If a company made billions of US dollars through Business A, but suddenly said it will do Business B without showing any performance or said Business B is better, then I don’t think the Business A featured in their application will be sustainable.”
The CEO also went on to suggest that such companies cannot adapt to a new market of regulators and that the market itself is too volatile and risky for anyone who may be interested in investing.
Bitmain has had its share of management issues as well as its Founder and CEO Jihan Wu was ousted after he was blamed for the huge losses incurred by Bitmain in Bitcoin Cash mining operations. Wu has since been absconding.
Bitmain operated mining pools collectively once contributed over 45% of all hashing power in the Bitcoin mining pool globally. However, this is down to 23%, a reflection of how other mining pools have rushed in to fill the vacuum left by Bitmain. Even in the field of manufacturing, Bitmain has sold most of its flagship S9 miners for a loss over the past year, at a cost that wasn’t even able to recover the breakeven cost of mining.
All these factors over the past year and a half have contributed to the uncertainty that is associated with Bitmain in 2019. With a new management, hundreds of layoffs and after struggling to recover from huge losses incurred in grand investment schemes, it might take a while for Bitmain to actually dominate the market as it once did.
And while Bitmain’s present condition has broken their monopoly and encouraged small scale miners to build up their enterprise, a behemoth like Bitmain would bring down cryptocurrency prices even more if it continues to struggle. It is therefore perhaps in everyone’s interest that Bitmain recovers soon.