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Bitmain IPO: go leveraged long popcorn

Bitmain IPO: go leveraged long popcorn


So here’s the situation in a nutshell.

Bitmain designs crypto mining chips and runs the largest mining pool in the world, Antpool. It’s a privately held company run by CEO Jihan Wu, who has carved out a reputation for himself as a vocal supporter of Bitcoin Cash, which made a failed land-grab on the Bitcoin brand name with a very public fork last year.

Bitmain holds somewhere in the region of a billion dollars worth of BCH. It has been accumulating BCH all year, mining hard and selling its BTC holdings, buying BCH and propping up the price of the currency in the process.

The company is making a massive bet on BCH. Problem is, the bear market has stuck around a lot longer than planned. The reserves they’ve built up have been dwindling in dollar value as all crypto slides against fiat.

The thing is, BCH is illiquid. The market cannot support the kind of sell volumes that BTC can. So if you’re holding a lot of BCH — say, somewhere in the region of a billion dollars worth — you’ve got a problem. Because you don’t hold a billion dollars worth. Selling any significant amount is going to crash the price and leave you with pennies on the dollar. And that is what in financial jargon is known as a ‘bummer’.

So what do you do when you’re stuck with crypto worth a billion dollars on paper, that’s losing value all the time but that you can’t sell on any exchange?

Yep, that’s it. OTC. Specifically, a special kind of OTC trade known as an IPO or, more accurately, ‘exit scam’. This involves selling the whole lot off to investors in a massive public offering, passing the bag onto unsuspecting guys who’ve heard crypto is going places but don’t understand that BCH is fighting a losing war with gravity.

All of Bitmain’s BCH — almost 6% of outstanding supply — will be sold to investors in an $18 billion offering. IPO documents suggest that this BCH accounts for around 70% of the company’s $1.2 billion valuation. Propping up the currency, which certainly doesn’t see a lot of organic use, would help inflate that price tag.

Emphasise the good, hide the bad. Like the almost-certainly mediocre Q2 earnings that didn’t make it into the IPO document.

All is not what it seems with Bitmain. And the crypto community is going to be needing a whole lot of popcorn as the truth becomes clear.

Take a look at here for more details.


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