Bernstein: Crypto miner Bitmain may be losing its edge

HONG KONG: Bitmain Technologies Ltd, the designer of cryptocurrency mining chips that’s planning a landmark initial public offering, may be losing its technological edge, according to Sanford C. Bernstein & Co.

The Beijing-based company, co-founded by 32-year-old billionaire Jihan Wu, may need to write down the value of its inventory as makers of rival mining gear catch up, analysts led by Mark Li at Bernstein wrote in a report.

Taiwan Semiconductor Manufacturing Co, which produces chips designed by Bitmain, should ask the company to make full prepayments and refrain from adding capacity solely for crypto-related demand, according to the Bernstein analysts.

“The competitiveness of Bitmain’s chips is in question,” the analysts wrote.

While Bernstein called Bitmain’s performance last year a “wild success” and noted that it controlled an estimated 85% of the market for cryptocurrency mining chips, the company is facing growing competition from players including Canaan Inc and Ebang International Holdings Inc, which are also pursuing IPOs in Hong Kong. Demand for all of the companies’ products has come under pressure this year after a selloff in virtual currencies cut Bitcoin’s value by more than half.

Bitmain, which is also one of the biggest operators of crypto mining collectives, is planning a Hong Kong IPO that could raise as much as US$3bil, people with knowledge of the matter said last week.

Speculation about the company’s finances has intensified in recent days. Unverified investor presentations purporting to show details of Bitmain’s business have been circulating online, prompting discussions in crypto circles over the company’s exposure to falling virtual currency prices.