Bitmain's Big Bet On Bch: Why?

In 2018, Bitmain, a privately owned company headquartered in Beijing, China, that designs application-specific integrated circuit (ASIC) chips for bitcoin mining, made a significant investment in Bitcoin Cash (BCH). This investment was made through the sale of a large quantity of bitcoin, with Bitmain acquiring about 1 million BCH. However, this investment appears to have been a gamble that did not pay off, as cryptocurrencies suffered a significant slump shortly after. As a result, Bitmain's investment likely led to substantial losses, estimated to be as high as $500 million. The decision to invest in BCH and the subsequent challenges in divesting the holdings have raised concerns among analysts and investors about the risks associated with Bitmain's initial public offering (IPO) plans.

Bitmain sold BTC for BCH

Bitmain sold off a large quantity of bitcoin to buy bitcoin cash (BCH) in 2018. This was likely a gamble on bitcoin cash, but it hasn't paid off as cryptocurrencies have since slumped. Samson Mow, the CSO of Blockstream, tweeted an image that appeared to suggest Bitmain sold nearly all its BTC and bought about 1 million BCH. This may have been an attempt to prop up the price of BCH. However, BCH has plummeted in value since then, costing Bitmain as much as $500 million.

Bitmain was "unable or unwilling" to sell any mined BCH. Instead, they used their resources to buy BCH rather than mining bitcoin directly. One of the major issues with the bitcoin cash purchase is that BCH is not as liquid as BTC, with far fewer buyers and essentially zero over-the-counter market opportunities. If Bitmain decides to dump the remaining BCH it holds, the network will become highly susceptible to a 51% attack.

Bitmain's IPO plans have caused concern among analysts due to the risks associated with the large amount of possibly-illiquid BCH assets the company is holding. Despite the market downturn, Bitmain has divested about 25% of its BCH holdings, although mostly at a loss.

Bitmain Technologies Ltd., a privately owned company headquartered in Beijing, China, designs application-specific integrated circuit (ASIC) chips for bitcoin mining. It was founded in 2013 and became the world's largest designer of ASIC chips for bitcoin mining by 2018. The company has been involved in several legal disputes, including patent rights infringements and allegations of mining cryptocurrency for its own benefit on its customers' devices.

Bitmain was unable or unwilling to sell any mined BCH

Bitmain was either unable or unwilling to sell any mined bitcoin cash (BCH). This was likely due to the fact that BCH is not nearly as liquid as BTC, with far fewer buyers in the current climate and almost no over-the-counter market opportunities.

Bitmain's significant holding of illiquid BCH poses a risk to investors participating in its IPO. If Bitmain gets stuck holding a large quantity of BCH that it is unable to sell, it could suffer major losses. This risk is exacerbated by the fact that if Bitmain does decide to dump its remaining BCH holdings, the network will become highly susceptible to a 51% attack.

Bitmain's decision to hold onto its BCH may also be due to its efforts to boost BCH prices. Antpool, a Bitmain-operated mining pool, burned 12% of the BCH they mined by sending them to irrecoverable addresses. Additionally, Bitmain may have been hoarding BCH and providing artificial price support on exchanges to prop up the price of BCH.

However, Bitmain's strategy appears to have backfired, as the value of BCH has plummeted since its purchase, costing the company as much as $500 million. The company has also faced other challenges, such as a decrease in BTC holdings, increasing competition in the crypto hardware market, and an unsuccessful transition into the AI marketplace.

In summary, Bitmain's inability or unwillingness to sell mined BCH, coupled with the decline in BCH value and other business challenges, has put the company in a difficult position. The decision to hold BCH may have been influenced by a desire to boost its price, but this strategy has ultimately resulted in significant losses for the company.

Bitmain's BCH holdings are illiquid

Bitmain's significant investment in BCH has been a controversial topic. The company sold a large quantity of Bitcoin (BTC) in order to buy BCH early in 2018, which was seen as a gamble on the cryptocurrency. However, since that time, cryptocurrencies have suffered a significant slump, and Bitmain's investment has likely not paid off. Bitmain's purchase of BCH is estimated to have cost the company as much as $500 million.

The lack of liquidity in Bitmain's BCH holdings poses a risk to investors considering participating in the company's initial public offering (IPO). If Bitmain is unable to sell its BCH holdings, it could suffer major losses. Additionally, if Bitmain does decide to dump a large amount of BCH onto the market, it could further drive down the price of BCH and hurt the coin's value permanently.

The illiquidity of Bitmain's BCH holdings is further exacerbated by the company's continued accumulation of BCH through its hardware business and its policy of hoarding BCH instead of selling it on the market. As a result, Bitmain is stuck with these coins and faces the difficult decision of either holding onto them and hoping for a bullish crypto market or dumping them onto the market and risking significant losses.

The situation highlights the complex nature of the company and the ecosystem, and it remains to be seen what the future holds for Bitmain and its BCH holdings.

Bitmain's IPO plans

Bitmain, a privately-owned company headquartered in Beijing, China, has been planning to go public since 2018. The company filed for an IPO with the Hong Kong Stock Exchange in September 2018, but its application lapsed in March 2019 as investors were concerned about the fall in bitcoin's value.

Bitmain Technologies then filed for an IPO in the United States, but it is unclear whether this attempt was successful. The company has had multiple attempts to list its stocks on the United States and Hong Kong stock exchanges, but none have succeeded as of 2024.

Despite the concerns, accredited investors can buy pre-IPO stock in Bitmain through platforms like EquityZen, which facilitate investments from early employees and provide private market access to accredited investors.

Bitmain's BCH hoarding policy

• Selling BTC for BCH: Bitmain was found to have sold a large amount of bitcoin (BTC) to purchase bitcoin cash early in 2018. This move was likely a gamble on bitcoin cash, but it did not pay off due to the subsequent slump in cryptocurrency values. This resulted in losses for Bitmain, estimated to be around $500 million.
• Unwilling or Unable to Sell BCH: Bitmain was "unable or unwilling" to sell the BCH they had acquired. Instead, they used their resources to buy BCH rather than mine bitcoin directly. This decision was questionable as BCH has far fewer buyers and limited over-the-counter market opportunities compared to BTC.
• Early Hoarding Policy: Bitmain had an early policy of hoarding BCH and not selling it on the market, as they typically did with their other crypto holdings. This contributed to the accumulation of a large cache of BCH.
• Divestment Challenges: Bitmain has attempted to divest their BCH holdings, but it is nearly impossible for them to do so on the market. The BCH markets lack the liquidity needed to absorb the vast number of coins Bitmain holds. As a result, they are stuck with these holdings, or they risk dumping the entire market and hurting the coin's value.
• Artificial Price Support: Bitmain engaged in artificial price support or pumping on exchanges to try and influence the value of BCH. This was done to potentially make their holdings more attractive or to create a favourable impression of the coin's performance.
• Impact of Bear Market: The persistence of the bear market has negatively impacted Bitmain's ability to divest their BCH holdings. The longer the bear market continues, the more challenging it becomes for Bitmain to offload their BCH without incurring significant losses.

In summary, Bitmain's BCH hoarding policy involved accumulating a large amount of BCH through selling BTC and not selling their BCH holdings on the market. However, the subsequent slump in cryptocurrency values and the illiquid nature of the BCH markets have made it challenging for Bitmain to divest these holdings without incurring substantial losses. The company's IPO plans also face risks due to the uncertainty surrounding the value of their BCH assets.

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