Bitmain Tech may be losing its edge, says Bernstein

This article first appeared in The Edge Financial Daily, on August 23, 2018.
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HONG KONG: Bitmain Technologies Ltd, the designer of cryptocurrency mining chips that’s planning a landmark initial public offering (IPO), may be losing its technological edge, according to Sanford C Bernstein & Co.

The Beijing-based company, co-founded by 32-year-old billionaire Jihan Wu, may need to write down the value of its inventory as makers of rival mining gear catch up, analysts led by Mark Li at Bernstein wrote in a report dated yesterday.

Taiwan Semiconductor Manufacturing Co, which produces chips designed by Bitmain, should ask the company to make full pre-payments and refrain from adding capacity solely for crypto-related demand, according to the Bernstein analysts.

“The competitiveness of Bitmain’s chips is in question,” the analysts wrote.

Bitmain, which is also one of the biggest operators of crypto mining collectives, is planning a Hong Kong IPO that could raise as much as US$3 billion (RM12.29 billion), people with knowledge of the matter said last week.

Speculation about the company’s finances has intensified in recent days. Unverified investor presentations purporting to show details of Bitmain’s business have been circulating online, prompting discussions in crypto circles over the company’s exposure to falling virtual currency prices.

Bitmain has likely been acquiring large amounts of Bitcoin Cash, posing a “major risk” as the Bitcoin offshoot’s value declines, Li said. Bitcoin Cash has tumbled by about 68% since the first week of May, versus a 30% drop in Bitcoin, according to Bloomberg composite pricing. — Bloomberg