Rival cryptocurrency mining equipment firms are starting to catch up on Beijing-based Bitmain Technologies with analysts claiming that a write-down of the value of their inventory may be required.
Bitmain’s Dominance May Be Waning
Bitmain Technologies is the world’s top designer when it comes to crypto mining chips, but analysts claim that despite planning the release of their own initial public offering (IPO), the firm might just be losing their edge over its competitors. On Wednesday, analysts at Sanford C Bernstein & Co released a report detailing their findings and predictions on the future of Bitmain.
Co-founded by billionaire Jihan Wu, who is one of the most influential figures in the cryptosphere, Bitmain currently controls approximately 85% of the market for cryptocurrency mining chips. Yet, analysts, led by Mark Li at Bernstein believe that the tide is now turning and that rivals are starting to catch up quickly.
“The competitiveness of Bitmain’s chips is in question” was one quote in the report from a Bernstein analyst. They believe that two other cryptocurrency mining companies, Canaan Creative and Ebang International Holdings are starting to bridge the gap between themselves and Bitmain, while the two are also looking at launching their own IPOs.
This unrelenting competitiveness, combined with the added pressure of a reduction in demand for their chips, which are produced by Taiwan Semiconductor Manufacturing Co (TSMC), has led the Bernstein analysts to suggest that Bitmain is under pressure. Additionally, the 70% decline in the price of BTC has also seemingly weighed on the firm’s verdict on the fate of Bitmain.
Despite Bitmain enjoying a profitable 2017 due to the cryptocurrency boom, Bernstein analysts believe that Bitmain may have to consider a write-down of the firm’s ASIC inventory. They also feel that TSMC should request payment up front for the production of ASICs ordered by Bitmain, along with avoiding an increase in manufacturing capacity for the purpose of cryptocurrency-related machines only.
There has been increased speculation about Bitmain and their finances recently since unverified investor presentations surfaced online. These presentations are said to show the business details of Bitmain, with many now discussing that the continued reduction of the value of cryptocurrencies, on the whole, might be affecting the company’s financials.
Bitcoin alone has lost 30% of its value since the end of May which has caused a domino effect on the markets with many others suffering similar or even worse reductions in value.