Cryptocurrency Tech Will Make Web Look like ‘Cute Experiment’: Circle CEO

Circle CEO Jeremy AllaireBlockchain unicorn Circle has made a series of strategic moves that all have one theme: to become a dominant force in the world of cryptocurrency. The startup is backed by some of the most influential companies in the sector, and the CEO believes that tokenization is truly the future. Boston-based Circle is not interested in

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Crypto Billionaires Among China’s Wealthiest, Despite Bear Market

Bitcoin price china CryptocurrencyThere is no question that the entire cryptocurrency sector is in a bear market, with many cryptocurrencies losing over 50% of their value.  However, this certainly hasn’t prevented individuals from becoming very wealthy through cryptocurrency-related ventures.  Specifically, despite the decrease in market capitalizations of various cryptocurrencies, several Chinese businessmen have landed onto a list of … Continued

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Billion-Dollar Startups Flourishing in Switzerland’s ‘Crypto Valley’

Next Silicon Valley: Switzerland's Billion Dollar Cryptocurrency Startups Flourish

The top 50 cryptocurrency and blockchain-related companies in Switzerland’s version of Silicon Valley are now worth $44 billion combined, underscoring the steady growth of the Swiss crypto industry. Altogether, cryptocurrency firms employ about 3,000 people throughout the small country. Included among the top 50 are five “unicorns,” or startups with a market valuation of more than $1 billion, according to a new report by Zug-based investors CV Venture Capital.

Also read: ‘Crypto Fund- Approved to Manage Cryptocurrency Investments in Switzerland

Top 50 Swiss Crypto Firms
Now Worth $44B

The report shows that the number of companies working either with digital coins or the blockchain in “Crypto Valley,” the heartland of cryptocurrency activity near the Swiss municipality of Zug, has almost doubled to 600 in the past year. The figures, contained in an online directory by CV, include companies operating in neighboring Liechtenstein. About 350 entities were featured in the directory when the CV Maps database was first launched in April 2017.

Next Silicon Valley: Switzerland's Billion Dollar Cryptocurrency Startups Flourish

Of the top 50 companies listed, five are unicorns that are either based in Crypto Valley or originated from the area. They include the world’s biggest bitcoin miner, Bitmain, as well as other leading cryptocurrency businesses such as Cardano, Dfinity, Ethereum and Xapo, CV said. Bitmain’s revenue soared 1,700 percent to $2.5 billion in 2017, from just $137 million two years earlier. Its full-year net profit rocketed to $1.2 billion.

More than 440 people, most of them expatriates, work for Zug’s top crypto firms. All of the region’s companies appear to be well-funded, boasting a combined market value of more than $44 billion. Capital levels often run “into the tens or hundreds of millions of dollars” for several companies — a feature that distinguishes them from  startups in other parts of the world, CV said in the report.

“The top 50 report shows that Crypto Valley has retained its appeal as a location for blockchain companies from all sectors,” said Ralf Glabischnig, founder and managing partner of technology firm Inacta, which built the database, in an emailed statement to

CV Venture Capital, a blockchain-focused investor and incubator in Zug, worked with accountants PwC Strategy & Switzerland and Inacta to identify the top 50 Crypto Valley companies based on data from CV Maps, various crypto exchanges, media reports and social media platforms such as LinkedIn.

Progressive Paradise

Switzerland has taken a progressive stance towards cryptocurrency, legalizing its use and formalizing crypto transactions in a range of contexts. But some crypto project teams still find it difficult to open bank accounts and some crypto-focused bankers and investors have highlighted the need for greater regulatory clarity.

Next Silicon Valley: Switzerland's Billion Dollar Cryptocurrency Startups Flourish

Nonetheless, the country sees virtual money and blockchain technology as strategic innovations in global finance and is intent on maintaining the growth of the industry, while expanding the number of jobs it has to offer in the field. The country’s tax regulator considers cryptocurrencies to be assets, subject to wealth taxes that must be declared in annual tax returns.

However, uncertainty among legacy Swiss banks on the policing and implementation of initial coin offerings (ICOs) in the financial market has made them cautious; many remain reluctant to issue company accounts to participants in the nascent market, leading to the departure of at least two major players this year alone. Despite this, many banks have started to open up. Maerki Baumann, an 86-year-old private bank, now accepts crypto assets, for example.

Crypto Super-League

To qualify for CV’s self-described “crypto super-league” list of Switzerland’s top-rated companies, firms must meet three criteria. First, blockchain technology must be part of a company’s core business. Second, qualifying firms should employ more than one person in Switzerland or Liechtenstein. Finally, companies hoping to make the cut “should make some contribution to the blockchain ecosystem and the wider Crypto Valley community.”

Additional requirements include ticking one of the following three boxes: funding in excess of $10 million, a valuation of more than $10 million or the provision of at least 10 full-time positions in Switzerland or Liechtenstein.

Next Silicon Valley: Switzerland's Billion Dollar Cryptocurrency Startups Flourish

The report by CV also sheds light on the growth of various subsectors of the crypto industry in Zug, including details on market capitalization and headcounts at specific companies. From health tech to data analytics and the e-government sphere, several industries are running businesses based on cryptocurrencies and the blockchain in Crypto Valley. Two secondary segments feature in the top 50 list: brokerages, trade and exchange, as well as platform and protocol. Each sector is represented by 11 companies. Other areas covered include the hardware and middleware industries, as well as services related to community, peer-to-peer and loyalty.

Daniel Diemers, partner at PwC Strategy & Switzerland, said: “Crypto Valley has grown enormously in just three short years. Even two or three years ago, there were just 10 to 15 companies in the blockchain industry. PwC (realizes) … the potential of blockchain and how it is important for companies to understand the technology and to get close to innovative startups in the field.”

What do you think about the development of the cryptocurrency industry in Switzerland? Let us know what you think in the comments section below.

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New Venture Capital Fund Secures $100M to Invest in Crypto Startups

New Venture Capital Fund Secures $100 Million to Invest in Crypto Startups

Dragonfly Capital Partners, a new crypto-focused venture capital firm, has announced the launch of its first $100 million fund dedicated to investments in crypto assets. Its investors include Okex, Bitmain and other well-known names in the industry.

Also Read: Exchanges Roundup: Coinbase Volumes Hit 1-Year Low, UK Exchange to Fire Most Staff

Meet Dragonfly Capital Partners

New Venture Capital Fund Secures $100 Million to Invest in Crypto StartupsDragonfly promises to invest in three types of assets: crypto-native funds, “pick-and-shovel” tech startups and decentralized protocols and applications. It launches with a portfolio of more than 20 investments, including cryptofunds and asset managers, the stablecoin Basis, Spacemesh and Oasis Labs.

The founding team is led by managing partners Alexander Pack and Bo Feng. Pack previously managed crypto and fund investing for Bain Capital Ventures and was a general partner investor in Polychain Capital. Feng is the founding partner of Ceyuan Ventures and the largest investor in Okex, among many other ventures.

“Throughout our years of investing in crypto at our respective VC firms, we realized how difficult it is for incumbent investment firms to participate in this tech trend. The issue is that crypto is not just a new technology but a new tech-driven asset class, something we haven’t witnessed in decades,” said Pack. “A new asset class calls for a new breed of asset manager. That’s why we launched a crypto-dedicated fund and why we invest in other cryptofunds.”

Bringing East and West Together

New Venture Capital Fund Secures $100 Million to Invest in Crypto StartupsDragonfly claims to have identified a market opportunity to “bridge the gap between East and West in the crypto economy,” and thus has attracted investors from throughout the U.S. and Asia.

American investors include Salil Deshpande (Bain Capital Ventures), Marc Andreessen and Chris Dixon (A16Z), Cyan Banister (Founders Fund) and Olaf Carlson-Wee (Polychain Capital). Asian investors include Neil Shen (head of Sequoia China), Eric Xu (founder of Baidu), Bob Xiaoping Xu (founding partner of Zhenfund), Zhang Tao (chairman and founder of Meituan-Danping), Bao Fan (founder and CEO of China Renaissance Bank), Cai Wensheng (founder and chairman of Meitu), Justin Tang (founder and CEO of X Financial, elong), JP Gan (Qiming Venture Partners), and Annie Xu (head and general manager of Alibaba U.S.).

“I see a parallel between the internet boom in the ’90s and the current cryptocurrency market opportunity,” said Feng, who was one of the first venture investors on the internet. “The crypto revolution may be even bigger than the internet and more global. We take an ecosystem approach, investing in fund managers around the world and connecting the top technologists from the West to the largest crypto companies and user bases in Asia.”

Is it good for big players to invest in new crypto startups? Share your thoughts in the comments section below.

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Crypto Mining Giant Bitmain Acquires Bitcoin Cash Wallet

Open source browser-based cryptocurrency wallet Telescope has officially announced its acquisition by Bitmain Technologies Inc., the world’s largest crypto mining rig manufacturer, which also runs one of the world’s most extensive cryptocurrency mining pools. The move comes at an important time for Bitmain, which is increasing its involvement in the bitcoin cash space as it … Continued

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China-Based Crypto Exchange Coinex Pays Interest in BCH

China-Based Crypto Exchange Coinex Pays Interest in BCH

Crypto exchange Coinex will pay out long-term dividends, interest, in bitcoin cash (BCH) for coinex token (CET) holders, according to its website announcement. “If your CET holdings are on Coinex, we’ll calculate the dividends into BCH and allocate directly to your accounts,” the company explained.

Also read: Bitcoin Cash Speaker Series II Brings Leading Bitcoiners Together

Coinex to Pay Out Long-Term Interest in Bitcoin Cash

What began as a widely circulated subreddit rumor appears to be confirmed. Cryptocurrency exchange Coinex will be paying out long-term dividends, or interest, in BCH for their CET holders, according to the company’s website.

China-Based Crypto Exchange Coinex Pays Interest in BCH

China-based Coinex, owned by mining giant Bitmain, is a relatively young exchange, offering a range of crypto assets to be traded against the likes of BCH, bitcoin core (BTC), ether (ETH), and tether (USDT). It has a native token, CET, which can be traded against the others as well. Market makers are not charged a fee, while market takers pay a somewhat low 0.10% on trades. Coinex also processes over-the-counter trades and offers referral rewards. They employ a transparent method of token distribution, as all transaction fees collected and how they are distributed are displayed on the site in real-time.

Monthly Allocation

As of the beginning of this month, “Coinex will release ‘Lock & Mine CET’ and execute [the] ‘Long-term dividend allocation plan,’” the company explained. Holding a minimum 10,000 CET is required to receive BCH dividends, and none of the tokens may be acquired through mining – only ‘released’ CET qualify toward the offer. “Coinex will take a snapshot at 0:00 (UTC) everyday and allocate rewards of the previous day according to the snapshot results.” China-Based Crypto Exchange Coinex Pays Interest in BCH

“To guarantee the sustainable development of CET and interests of CET holders,” Coinex continued, “we decided to release a long-term dividend allocation plan by which CET holders will continue to receive dividends after ‘Trade-driven mining’ ends.” Allocation of BCH will occur monthly, and within seven business days of a new month. As always, that date might vary still depending on exactly when final settlement occurs.

“80% of Coinex’s total revenue will be allocated to CET holders and the remaining 20% is kept for Coinex development and daily operations,” the execution plan detailed. The exchange will also use a significant portion of its revenue to “repurchase CET from the secondary market and allocate to the qualified CET holders proportionately,” and holders can determine their personal ratio by dividing held CET by the total CET in circulation.

Do dividends and interest attract you to an exchange? Let us know in the comments below. 

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The Daily: Coinbase Launches Bundles, Coinswitch Supports Trading Without Account

The Daily: Coinbase Launches Bundles, Coinswitch Supports Trading Without Account

Crypto exchange Coinbase will present its clients with the option to buy bundles of multiple cryptocurrencies and access useful information about leading digital coins. Also in The Daily on Friday, users of exchange aggregator Coinswitch can now take advantage of the best rates across multiple platforms without the need to create an account, Neo launches bug bounty program, and Bitmain sells Decred miner.  

Also read: Around the World on 1 BTC and the Plausibly Deniable Brainwallet

Coinbase Offers Info on Leading Cryptos, Launches Coinbase Bundle

The Daily: Coinbase Launches Bundles, Coinswitch Supports Trading Without AccountThis week, US-based crypto trading platform Coinbase, known for its conservative approach to adding new coins, shared plans to increase the number of its offerings, as reported. Now the company has announced it’s launching Coinbase Bundle, a basket of cryptocurrencies investors will be able to acquire for as little as $25. Customers will have the opportunity to buy, sell and transfer the cryptos that will be stored in individual wallets. The Bundle, designed to provide fast and easy exposure to the crypto market, will be available to verified Coinbase users in the United States and Europe within a few weeks.

The San Francisco-headquartered exchange has also recently announced it will offer its customers detailed information about the 50 leading cryptocurrencies by market capitalization. The service will feature descriptions of the coins, links to their white papers and project websites, historical trading data, and the current marketcap, The Verge reported. The platform will also provide a comprehensive introduction to digital assets in its educational section known as Coinbase Learn, after admitting that “What is cryptocurrency?” is still the most common question asked by potential clients.

Coinswitch Users Trade on Multiple Exchanges Without Accounts

The Daily: Coinbase Launches Bundles, Coinswitch Supports Trading Without AccountA new aggregation tool offers investors the opportunity to trade cryptocurrencies on a number of leading platforms including Changelly, Idex, Hitbtc and Kucoin, and they don’t even need to create an account. With Coinswitch, traders are able to find the best exchange rates, which is an automated process, before they commit to a crypto-to-crypto transaction. The service is non-custodial and holders of the digital assets will only have to provide the addresses of the respective wallets to start trading their coins.

The interface also allows users to create a customized crypto exchange by adding a trading widget to their websites with zero code required, Sludgefeed reported. These platforms will be earning up to 50 percent of the revenues from all trades conducted via Coinswitch which also offers a referral program rewarding participants with another 25 percent paid in bitcoin core (BTC). Its developers claim that more than 100 sites have already integrated the service. According to the report, the project has the backing of some serious venture capital investors such as Sequoia.

Neo Announces Bug Bounty Program

The Daily: Coinbase Launches Bundles, Coinswitch Supports Trading Without AccountBlockchain project Neo, which like Ethereum offers a platform for smart contacts and coin offerings, has recently launched a Vulnerability Bounty Program (VBP). In an announcement posted on Medium and shared on Twitter, the team has invited security experts from different sectors to join the initiative and take part in the development of the Neo ecosystem.

All eligible reports will be investigated and the base bounty amounts will depend on the severity of the issues. Detecting a critical bug – one that can lead to substantial asset losses – will be rewarded with up to $10,000 USD. Neo is ready to pay up to $5,000 for finding vulnerabilities that can cause network failures and up to $2,000 for bugs leading to a single node failure. The bounty for the discovery of low risks can go below $500. The rewards will be distributed in the equivalent amount of NEO, the platform’s native coin.

Bitmain Starts Shipping New Decred Miner

The Daily: Coinbase Launches Bundles, Coinswitch Supports Trading Without AccountBitmain, the Chinese mining hardware producer, has announced the launch of its Antminer DR3 designed to process transactions for the Decred cryptocurrency. Decred (DCR), which is based on a hybrid Proof-of-Work (PoW) and Proof-of-Stake (PoS) blockchain consensus protocol, is currently ranking 30th by market cap, with a capitalization of over $333 million at the time of writing.

The new device mines DCR with a hashrate of 7.8 TH/s and power consumption of a little over 1,400 watts, the mining giant tweeted. The Antminer DR3 can already be ordered on Bitmain’s website and it’s currently sold for $673. The company will start shipping the miners from the first batch on October 8 for fully paid orders and on a first-paid-first-ship basis.

What are your thoughts on today’s news tidbits? Tell us in the comments section below.

Images courtesy of Shutterstock, Bitmain.

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Bitmain Likely Lost $400 Million Last Quarter: BitMEX Research

Bitcoin mining behemoth Bitmain likely posted a net loss of nearly $400 million last quarter, the China-based firm’s recently-filed public offering documents reveal. CCN reported yesterday that Bitmain had filed offering documents with the Stock Exchange of Hong Kong (HKEX), ahead of the long-awaited initial public offering (IPO) that promises to be the largest in … Continued

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Bitmain IPO concerns: the crypto giant recorded a big loss in Q2 2018

Bitmain’s IPO is the big news in the crypto world this week. The company just filed its IPO prospectus and the numbers are impressive, particularly the year-on-year growth between the first six months of 2018 and a year prior, which saw a near-10x jump in revenue and 7x growth in profit. Nevertheless, that aggregated six-month number may be masking what was a poor quarter of business for Bitmain.

Bitmain didn’t break out its revenue for Q1 and Q2 2018 in its prospectus, instead it blended them together with a nice looking figure for the first six months of the year, H1 2018. But we can crunch some numbers to give an idea of what it might be.

TechCrunch previously reported through sources that the company’s Q1 2018 revenue hit approximately $2 billion. Additionally, Fortune previously reported that the company carded a $1.1 billion profit during the same quarter, a number that’s in line with these revenue figures given that the prospectus reports a net margin of around 50 percent. For comparison, popular cryptocurrency wallet Coinbase made $1 billion in revenue in 2017.

But if we combine the aforementioned data points with the figures that were just reported, the Q2 numbers don’t look pretty. Specificifically, if combined H1 revenue was $2.9 billion with a $1.1 billion profit, then Q2 saw revenue sink to around $800 million with a loss of $400 million. That would be Bitmain’s worse quarter yet and not the kind of momentum that you want going into a listing.

My colleague Jon Russell earlier observed a number of potential risk signs in stated numbers: margins overall have come down. Gross margin in the first six months was 36 percent, down from 48 percent in 2017 and 54 percent in 2016. Contributing to that, the cost of sale percentage in the first half of 2018 rose to 64 percent from 51 and 52 percent in 2017 and 2016, respectively. Additionally, he detailed how the company over-estimated demand in 2018, and, as a result, its inventory ballooned by $1 billion. That unsold product is another indicator that Q2 did not go as planned.

Wu Jihan, co-founder of Bitmain Technologies Ltd., speaks during the Coingeek Conference in Hong Kong, China, on Friday, May 18, 2018. The conference runs through today. Photographer: Anthony Kwan/Bloomberg via Getty Images

We can also examine the financials from a holistic perspective. Adjusted return-on-asset (ROA) and return-on-equity (ROE) are indicators of how profitable a company is relative to its total assets and equity, respectively. Both numbers almost halved in 2018 vs 2017. So even though Bitmain was able to grow its top and bottom line, its overall operating efficiency has declined significantly, from 60.9 percent to 31.4 percent in adjusted ROA and 112.3 percent to 58.9 percent in adjusted ROE.

Where that operating efficiency level could stabilize will likely be a focus for public equity investors. With 94 percent of 2018 revenue coming from mining rigs, up from 80 percent from 2017, Bitmain is increasingly looking like a pure chips company, subject to cryptocurrency market conditions. As a reference, hardware company Nvidia, a company based out of California that also makes computer chips, generated revenues of $9.7 billion in its 2018 fiscal year (2017 calendar year). It’s been operating for 19 years as a public company and its ROA was around 27 percent and adjusted ROE was around 40 percent in calendar year 2017. Nvidia told investors last month that revenue from crypto-related sales had substantially declined, another factor that indicates Bitmain’s Q2 was a tough one.

More generally, Bitmain currently has 11 mining farms in China, including Sichuan and Inner Mongolia. It’s looking to build out 3 new mining farms in the U.S. in Washington, Texas and Tennessee, while it is also contemplating a mining farm in Quebec. This indicates that the team is cognizant of their concentration in revenue from mining rigs and is attempting to diversify into other businesses.

TechCrunch looked at the top equity holders closely and it appears a total of ~60 percent is owned by the top 5 founding individuals. We know of co-CEOs Wu Jihan and Micree Zhang that own majority of the portion, but there is also Zhao Zhaofeng, Ge Yuesheng, and Song Wenbao. The next largest shareholder is Sequoia, which owned the investment through another entity called SCC Venture VI. Sequoia owns over 2 percent of Bitmain shares through its various funds. Coatue also owns 0.14 percent. The employee’s pool in aggregate was about 18.5 percent.

Aside from Q2 numbers and potentially a hit in Q3 from the ongoing market downtrend, there are few other investor concerns that may surface. For one, Taiwan Semiconductor Manufacturing Company (TSMC) is Bitmain’s single largest supplier, accounting for 59.2 percent of total supply in the first half of 2018, and generally hovering over 58 percent in the last 2.5 years, leading to concentrated supplier risk.

Another issue is that for the cryptocurrencies that Bitmain owns — that is, Bitcoin, Bitcoin Cash, Ether, Litecoin and Dash. Bitmain accounted for these cryptocurrencies at cost, which means that the value of these cryptocurrencies is priced at the time of acquisition, not at the current market value. A decent portion could have been acquired during the bull market last year, this may be perceived as overly bullish or unrealistic by public investors, especially by those who have yet to be bought into the value of cryptocurrency, or already find it extremely risky as an asset class.

The questions and doubts from public investors around the unpredictability of the crypto market will be one of the many challenges that crypto companies face if they choose public markets. As we mentioned previously, there are many reasons to stay private as a crypto company, including keeping quarterly financials private as well as dealing with market fluctuations and the ongoing volatility and uncertainty in the cryptocurrency world. However, the con is that early employees may not get liquidity in their stock options.

Wu has said that a Bitmain IPO would be a “landmark” for both the company and the cryptocurrency space. In such a bear market, Bitmain may be taking a risk by going public, but it’s certainly a large step on behalf of the crypto market. When the filings came out, the value of Bitcoin Cash rose by 23.7 percent from the start of the day, reaching a nearly three-week high, and at around 6pm PST it was still up 20 percent.

Several of Bitmain’s competitors have filed for IPO since the beginning of 2018, but most of them are significantly smaller. For example, Hong Kong-based Canaan Creative filed in May, and its latest target is $1 billion to $2 billion in fundraising with 2017 revenue of $204 million. If Bitmain’s Q2 was as poor as the numbers suggest, it may need to revise the target raise for its Hong Kong listing.

Bitmain Bids for Public Listing on the Hong Kong Stock Exchange

Bitmain Bids for Public Listing on the Hong Kong Stock Exchange

The China-based mining manufacturer Bitmain Technologies has filed its initial public offering (IPO) prospectus in order to gain approval to be listed on the Hong Kong Stock Exchange.

Also Read: Japanese Regulators Urgently Respond to Zaif’s Hack

Bitmain Officially Files for IPO Status in Hong Kong

Bitmain Bids for Public Listing on the Hong Kong Stock ExchangeThe large mining firm Bitmain has officially initiated its attempt to be listed on the Hong Kong Stock Exchange (HKEX) with its multi-billion dollar initial public offering (IPO) bid this week. The application states that Bitmain Technologies Holding Company (比特大陸科技控股公司), a limited liability firm incorporated in the Cayman Islands is applying to be listed on HKEX. According to reports and leaked documents the suggested IPO could be around $15-18 billion with the listing possibly launching in Q1 of 2019.

The official IPO prospectus details the mining giant’s underwriters as well which include KPMG, Maples and Calder, Frost & Sullivan, and the China International Capital Corporation Hong Kong Securities Limited. Of course, the Bitmain IPO document says it is incomplete because most of the hard numbers have been redacted, and are also subject to change. In the prospectus overview, Bitmain explains they are “China’s second largest and among the world’s top ten fabless IC design companies in terms of revenue in 2017, according to Frost & Sullivan.”

The Beijing-based bitcoin firm adds:    

We focus on the design of ASIC chips specialized in cryptocurrency mining and AI applications, and we are the fourth largest global fabless ASIC chip design company in terms of revenue in 2017, according to Frost & Sullivan.

Bitmain Bids for Public Listing on the Hong Kong Stock Exchange
The 32-year-old CEO of Bitmain Technologies Holding Company (比特大陸科技控股公司) Mr. Jihan Wu

Unicorn Bitcoin Company Bitmain Experiences Exponential Growth Since Its Inception

In the filing, Bitmain says they have experienced “exponential growth” since they started, and revenue increased from “US$137.3 million in 2015 to $2,517.7 million in 2017.” The prospectus notes that Bitmain pulled in a staggering $1.2 billion in profit in 2017. The firm also details that profits have continued during Q1 and Q2 of 2018 as well. “Our adjusted EBITDA increased from $101.8 million for the first six months of 2017 to $122.9 million for the first six months of 2018,” Bitmain claims. The Chinese firm also gives a few details on some of the investments Bitmain has made this year like the recent funding of Circle Financial, and Opera Limited.

The company says they believe they have shown great strength over the years as a blockchain and mining business that sets them apart from other competitors. Bitmain says they have pioneered the ASIC chip industry in a “thriving blockchain ecosystem,” alongside a “close partnership with leading supply chain partners.” The IPO filing also follows last weekend’s announcement when the firm’s CEO Jihan Wu reported that Bitmain’s next-generation ASIC BM1391 7nm Finfet chip will be mass produced soon. Prior reports also reveal two other large mining companies Ebang Communication and Canaan Creative are also looking to go public with IPOs as well.

What do you think about Bitmain’s bid to go public in Hong Kong? Let us know your thoughts in the comment section below.

Images via Shutterstock, Pixabay, Bitmain, and Antpool. 

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Ripple and Bitcoin Cash Gain 20% as Crypto Market Adds $12 Billion

The crypto market has demonstrated a gain of $12 billion in the past 24 hours, triggered by a staggering 20 percent increase in the value of Ripple (XRP) and Bitcoin Cash (BCH). On September 25, CCN reported that the volume of XRP was a concern for traders as it dropped from $2 billion to $800 … Continued

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Crypto mining giant Bitmain reveals heady growth as it files for IPO

After months of speculation, Bitmain — the world’s largest provider of crypto miners — has opened the inner details of its business after it submitted its IPO prospectus with the Stock Exchange of Hong Kong. And some of the growth numbers are insane.

The document doesn’t specify how much five-year-old Bitmain is aiming to raise from its listing — that’ll come later — but it does lift the lid on the incredible business growth that the company saw as the crypto market grew massively in 2017. Although that also comes with a question: can that growth continue in this current bear market?

Without further ado, let’s get to the numbers.

The company grossed more than $2.5 billion in revenue last year, a near-10X leap on the $278 million it claims for 2016. Already, it said revenue for the first six months of this year surpassed $2.8 billion.

Bitmain is best known for its mining devices — which allow the owner to mine for Bitcoin and other cryptocurrencies — and that accounts for most of its revenue. 77 percent in 2016, 90 percent in 2017, and 94 percent in the first half of 2018. Other income is generated by its mining farms, shared mining pools, AI chips and blockchain services.

The company is fabless, which means it develops its own chip design and works with manufacturing partners who bring them to life as physical chips. Those chips are then used to power mining hardware which lets the owner earn a reward by mining Bitcoin and other cryptocurrencies. Bitmain claims over 80,000 customers with just under half of sales in China and the rest overseas.

The company said it posted $701 million in net profit in 2017, up from $104 million in 2016. For the first half of this year, it is claiming a gross profit of $743 billion. (Operational profit touched $1 billion for that period.)

That’s quite staggering growth, but there are some signs that 2018 comes with more challenges.

Margins are down. Gross margin in the first six months was 36 percent, down from 48 percent in 2017 and 54 percent in 2016. Contributing to that, the cost of sale percentage in the first half of 2018 rose to 64 percent from 51 and 52 percent in 2017 and 2016, respectively.

Interestingly, Bitmain accepts Bitcoin and other cryptocurrencies as payment for its miners, with some 27 percent of purchases last year paid for using crypto. As a result, those payments aren’t included in revenue but do show up as “investing cash inflow” when they are converted to fiat and used in the business. That’s a 2018 accounting problem right there.

As a result, Bitmain has a negative net cash used in operating activities position but those become positive when factoring in the crypto. The company said it received $887 million in crypto in the first half of 2018, $872 million in 2017, $56 million in 2016 and $12 million in 2015 — that’s based on rate at cost. Data appears to show that Bitmain cashed $484 million in crypto in 2017, and in the first half of 2018 that figure was $382 million.

The wild ride of 2017, however, led the company to over-estimated demand and, as a result, its inventory ballooned by $1 billion.

Here’s Bitmain explanation of how it managed to get it so wrong:

In early 2018, we anticipated strong market growth for cryptocurrency mining hardware in 2018 due to the upward trend of cryptocurrencies price in the fourth quarter of 2017, and we placed a large amount of orders with our production partners in response to the anticipated significant sales growth. However, there had been significant market volatility in the market price of cryptocurrencies in the first half of 2018. As a result of such volatility, the expected economic return from cryptocurrency mining had been adversely affected and the sales of our mining hardware slowed down, which in turn caused an increase in our inventories level and a decrease in advances received from our customers in the first half of 2018. Going forward, we will actively balance our business growth strategy, inventories and cryptocurrency asset levels to ensure a sustainable business growth and a healthy cash flow position, and we will adjust our procurement and prediction plan to maintain an appropriate liquidity level.

Despite an extra $1 billion in inventory, Bitmain estimates it has the working capital — including crypto pile and the result of its IPO — to sustain operations for at least another 12 months. That, according to its figures, is around $343 million in cash and cash equivalents but clearly it needs another megahit product or for the market demand to rise again.

Indeed, Bitmain just last week announced its newest mining chip — shrunk down to 7nm — which it believes will offer more power and greater efficiency for miners. That progress coupled with the rising value of crypto — i.e. what owners of Bitmain miners can earn — has helped the company steadily raise the price of its hardware.

Average selling price for its Bitcoin mining machines in 2015 was just $463, but that jumped to $767 in 2016, $1,231 in 2017 and $1,012 in the first half of 2018.

Bitmain co-founder Jihan Wu is the face of the company and one of its largest shareholders with a 20 percent stake

Beyond mining, the company is also developing AI chips, the first of which launched last year. They are used for developing cloud systems, as well as object, image and facial recognition purposes.

Citing third party figures, Bitmain claims to have a dominant 75 percent of the ASIC mining hardware market. It is investing heavily in R&D, which reached $73 million last year and $86 million during the first half of 2018. In addition, around one-third of its 2,594 employees are listed as working in research and development.

Bitmain’s document confirms the company raised some $784 million across Series A, Series B and Series B rounds.

Its investor roster is fairly public thanks to leaks and it includes the likes of IDG, Sequoia China, and Kaifu Lee’s Sinovation fund. However, the prospectus does confirm that shareholders include retailer NewEgg, EDBI — the corporate investment arm of Singapore’s Economic Development Board — and Uber investor Coatue. Founders Ketuan Zhan and Jihan Wu are the largest shareholders and they control 36 and 20 percent, respectively.

We can expect Bitmain to flesh out the prospectus with more juicy information, including a target raise which will also generate its valuation. But for now there are over 400 pages of information to process, you can find them all right here.

Note: The author owns a small amount of cryptocurrency. Enough to gain an understanding, not enough to change a life.