Three Chinese manufacturers of bitcoin mining equipment, Bitmain, Canaan Inc and Ebang International Holdings are preparing to launch initial public offerings (IPOs) 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 chief executive Benjamin Quinlan 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] 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, president of TenX, a Singapore-based blockchain firm, has also warned that if coins switch mining algorithms, then the machines designed to mine them would become useless.
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 Canaan chips accounted for around 14% of the entire Bitcoin mining market last year.
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.
Two sources familiar with Canaan’s situation said the company had not yet fixed a date for a committee appearance, as it worked on clearing up questions from HKEX officials regarding due diligence done on its prospectus.
Dwarfing them all is Bitmain. Their chips accounted for 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.
Both Canaan and Ebang highlight the potential for their technology to be applied to other cutting-edge sectors. Other blockchain applications, AI tools, and 5G telecoms are mentioned as potential use cases for the specialized hardware.