Steer Clear Of The Bitmain IPO

Bitmain, the world’s leading maker of cryptocurrency mining chips, is planning to raise up to $18 billion in a Hong Kong IPO.

In 2017, Bitmain produced roughly 77% of all bitcoin mining equipment, and it has a huge share of the altcoin mining hardware market as well.

Bitmain generates revenue in two ways:

The company had a great 2017, $18 billion around $1.3 billion cash flow on $2.5 billion in revenue. At first glance, it appears to be a beautiful business model and possibly a safer way to get exposure to crypto.

However, I am steering clear of this IPO, and I believe it’s far riskier than most people assume. Here’s why…

Power Tripping?

As the world’s largest producer of bitcoin hardware, Bitmain feels it should have a large say in the direction of the coin.

Bitmain has disagreed with the bitcoin community on many critical issues, and things came to a head last year. Bitmain eventually threw its full weight behind “bitcoin cash” (BCH).

Bitcoin cash is a “hard fork” of bitcoin. In my view, it’s a cheap copy of bitcoin with a few major differences. Bitcoin cash has a much larger “block size” than bitcoin, which means it can process more transactions per second.

A larger block size, however, comes with significant downsides. It means the blockchain will grow in size much faster than bitcoin’s. And since every transaction is recorded, it takes a long time to sync and update.

There are other significant issues with bitcoin cash. In fact, just last week, a critical bug was discovered by a bitcoin developer. The developer reported the bug discreetly to the bitcoin cash team, and it was fixed before anything bad happened. But it could have been disastrous.

There’s a good reason that the real bitcoin community takes a cautious approach to upgrading the coin. In crypto, everything must be tested extensively before it’s released. From what I’ve seen, the bitcoin cash team does not take the same approach.