The bad news keeps coming for Bitmain, one of the largest companies in the crypto mining universe. After a couple of weeks of questioning about the transparency of its operations, a report has now been published that the Bitcoin (BTC) mining giant may be losing its technological edge to its competitors.
The report, released this week, on Wednesday, informs about an investigation conducted by Sanford C. Bernstein & Co. The study, led by Mark Li, notes that “Bitmain cash flow appears to be questionable, and the company may be gradually losing the technological advantage.”
Analysts pointed out that the company’s revenue in 2017 was below the firm’s estimates, which was because part of the production was kept in Bitmain inventories, instead of being sold to customers. However, they acknowledge that, despite the losses, the Asian company’s profits remain “remarkably high.”
The report also questions the future competitiveness of Bitmain chips, as it “failed on a 10nm chip and possibly on other projects.” That means that its competitors could now reach the current technological level of Bitmain, according to the report.
Additionally, the study pointed out that the startup’s significant stake in Bitcoin Cash (BCH) faces a depreciation risk because “BHC is illiquid and has depreciated by almost 20%” since Q1 2018.
Bitmain might lose its dominance in crypto mining
Through the report, analysts recommended Taiwan Semiconductor Manufacturing Co. (TSMC), which produces chips designed by Bitmain, the leading Bitcoin (BTC) mining equipment manufacturer, “to require the company to make full prepayments and to refrain from adding capacity only for the demand related to cryptos.”
In the light of these shortcomings, some observers wonder whether the recent substantial investments made by Bitmain to diversify it would be a sign of weakness rather than strength.
It is possible that the acquisition of a stake in the Opera browser and the investments in Block.one’s EOSIO protocol, as well as the blockchain Lambda storage programme, are the result of the decline of its core business, crypto mining.
There has been much talk recently that Bitmain, the company founded by Jihan Wu, is raising funds for an Initial Public Offering (IPO) on the Hong Kong Stock Exchange. However, some of the reports on large companies, which have allegedly participated in previous rounds of funding, have been denied by the firms involved.
Jackson Bey was born and raised in Lethbridge Alberta but moved east when he was 22. Apart from running his own consulting firm. Jackson spends his time canoeing the many lakes of Ontario. As a financial journalist Jackson has published stories for CBC Business Online, as well as Buzz Feed and Motherboard. As a contributor to Billionaire 365, Jackson mostly covers markets and trade.