Three of the largest cryptocurrency mining hardware manufacturers are preparing to launch initial public offerings (IPOs) in Hong Kong. However, the crypto price slump and regulatory issues could negatively impact on the success of said offerings.
Is the Demand Still There to Necessitate IPOs?
Bitmain, Canaan Inc., and Ebang International Holdings are the three largest producers of Bitcoin mining equipment on the planet.
The three are all currently preparing to launch independent initial public offerings in Hong Kong.
However, experts believe that falling cryptocurrency prices this year will lessen demand for mining units. Potential investors should therefore be wary about taking part in these offerings. An executive at consultancy firm Quinlan & Associates explained:
“The marked decline in the price of bitcoin since the start of the year is likely to weigh on investors’ interest in these companies… [Yet] the fall in the price of bitcoin from its peaks has not been matched by an equivalent fall in the numbers of people mining it.”
Julian Hosp, the president of blockchain firm TenX added that coins could switch mining algorithms too, which makes investing in such an offering even riskier. However, since Bitmain themselves make up a large portion of the Bitcoin hash rate, it would be incredibly foolish for them to back a change that would render their own hardware redundant.
Canaan Inc. filed plans for their offering in May. It hopes to raise at least $400 million from an IPO. Concerns about the future of the market have meant that the firm has since reduced its initial target figure of $2 billion. According to a report in Reuters, Canaan chips accounted for around 14% of the entire Bitcoin mining market last year.
Meanwhile, Ebang International is aiming to raise as much as $1 billion. Its offering is thought to be ready for consideration by the listing committee in September. The plans themselves were filed in June of this year.
Dwarfing them all is Bitmain. Their chips accounted for a massive three quarters of the mining market last year. Reports on their goals for their IPO have varied tremendously. At the upper end of estimates, figures as large as $18 billion have been cited. It is now thought that Bitmain aims to raise a still-impressive $3 billion in their offering. That said, concerns about the management of Bitmain itself have been raised in relation to their IPO.
In addition to the above concerns over demand and potential (although unlikely) technological problems, there are also regulatory issues with the future of cryptocurrencies, as well as the IPOs themselves. The Reuters article cites sources “close” to the various deals as being “aware” of the regulatory scrutiny on the industry.
In light of questionable demand for Bitcoin hardware going forward, the companies are keen to stress that their powerful chips can be put to other uses other than cryptocurrency mining. Other blockchain applications, AI tools, and 5G telecoms, are mentioned as potential use cases for the specialised hardware.
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