Bitmain has sold much of its Bitcoin for Bitcoin Cash, according to a pre-IPO document:
According to the Bitmain pre-IPO investor deck, they sold most of their #Bitcoin for #Bcash. At $900/BCH, they’ve bled half a billion in the last 3 months. If Bitcoin Core devs didn’t disclose the Bcash vulnerability, it could’ve wiped a billion dollars off their balance sheets. pic.twitter.com/9BMywdvvby
Time to buy the dip?
— Samson Mow (@Excellion) August 11, 2018
As Bitmain prepares to list itself on a stock exchange, most likely that of Hong Kong, and at a valuation of $18 billion no less, this preference could have interesting implications.
From 0 to 1,000,000
In the above chart, the first column represents amount held and the second column displays the average price at which the coin was bought, in USD. In December 2016 Bitmain held 71,560 Bitcoin and no Bitcoin Cash, and in March 2018 held 22,082 Bitcoin and 1.02 million Bitcoin Cash.
This becomes more interesting when we take into account a few recent developments.
Firstly, Bitmain management has demonstrated a predilection for Bitcoin Cash. According to Bitcoin.com, Bitmain-associated developers have been discussing a proposal called ‘Wormhole’, which would be a layer for building smart-contracts on the Bitcoin Cash blockchain. Following on from this, Bitmain announced last week a $3 million investment in a Bitcoin Cash-powered digital advertising company which will use an unspecified Bitcoin Cash-based smart contract protocol to develop its own token.
5 percent of all BCH
Secondly, in April 2018, Antpool, a Bitmain-controlled mining group that is responsible for 14.4 percent of all Bitcoin mining, announced that it will be destroying 12 percent of all Bitcoin Cash mining rewards.
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The only reason that a business would burn money that it made is to raise the value of the remaining money. And indeed, the price of Bitcoin Cash rose by approximately 50 percent after the announcement.
There is a circulating supply of 17,288,638 BCH in the world, according to coinmarketcap.com. Going by the above document, Bitmain holds approximately 5 percent of the whole lot. In the aforementioned announcement, in which it encouraged other mining pools to burn some BCH too, Antpool said that it burned the money to reward BCH holders.
What does this mean for Bitcoin Cash?
It is hard to overstate the importance of Bitmain in the world of cryptocurrency.
Basically, it is a Hong Kong-based cryptocurrency company that manufactures/sells/rents Bitcoin mining computers and runs a collection of mining pools. Those pools account for almost half of all Bitcoin mining.
It has been expanding and acquiring with vigour, recently opening a facility in Texas (giving it a presence in six different countries) and purchasing a majority share in Opera Ltd of Opera web browser fame. In related news, the Opera browser recently became the first to integrate a built-in cryptocurrency wallet.
An IPO is when a company becomes listed on a stock exchange and sells its stock to the public. Bitmain is expected to begin its own this year on the Hong Kong Stock Exchange, although founder Jihan Wu has indicated that a different venue could be chosen. Valued at $18 billion, Bitmain’s will be among the biggest sales in history. Facebook’s IPO (2012) was worth $16 billion, and that of Visa Inc. (2008) was $19.7 billion.
In July 2018 Bitmain raised a total of $1.3 billion from investors, signalling serious interest from the public.
What does its preference for Bitcoin Cash mean? An endorsement from the dominant cryptocurrency mining operation in the world can certainly be seen as a positive for Bitcoin Cash. On the other hand, Bitmain’s control of the BTC blockchain was worrying enough. Bitcoin Cash is smaller and the company’s dominance thereof would be more complete, were it to start concentrating on that coin instead. This could be seen as being unhealthy for Bitcoin Cash in the long run.