Weekly Blockchain Industry Report-24th Issue: Bitmain Submitted Its Prospectus to HKEX

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OK Research

7 min readOct 9, 2018

(September 22nd–September 28th, 2018)

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Market Overview

This week, the daily average global cryptocurrency’s market capitalization was $218.524 billion, representing a 9.21% increase from last week. Among them, the Top 5 cryptocurrencies’ market cap increased by 9.32%;The daily average transaction volume was $16.4 billion, representing a 38.12% increase. Meanwhile, the Top 5 cryptocurrencies’ transaction volume increased by 23.23%. All of them experienced a price diving before they bouced back later this week, BCH had a very strong performance, its maximum price increase reached 36.48%.

Among the top 200 market cap cryptocurrencies , the biggest winner this week is BAT in advertising field, its maximum price increase was 29.22%. Beside, in the top 10 winners, the projects in cryptocurrency & payment field count 50%.

Analysis of Top 200 Market Cap Projects

Until 12:00 p.m. of the releasing date, the market capitalization of the top 200 projects increased by 5.72% compared with last week. Based on our classification of 4 categories: cryptocurrency and payment, basic chain and protocol, vertical chain and protocol, and vertical industrial application, only the projects of the vertical chain and protocol sector decreased while projects in other 3 fields increased in price. Among them, vertical industrial application sector experienced highest price increase.

Through further classification of the vertical chain and protocol and the vertical industrial application sectors, it was found that Entertainment sector experienced market cap increase as high as 59.18%, but Health field’s market cap decreased by 11.76%.

Analysis of Newly Listed Projects

According to latest announcements from more than 30 exchanges including OKEx, Binance, Huobi, Bitfinex, Bithumb, ZB.com, Upbit, HitBTC, Bittrex, Poloniex, there are 8 newly listed cryptocurrencies and 20 newly listed trading pairs. Among them, BOXX/BTC increased in price by 4.31%.

Analysis of Closed Public Offering Projects

There have been 37 closed public-offering projects this past week, with the soft cap totaling nearly 187 million USD. Among these projects, IoT projects have the largest soft cap, exceeding 5 million USD.

Important News on Global Governmental Policies this Past Week

The US: A Judge of the US Eastern District Court of New York ruled that Some ICOs can be considered securities under US law. The ruling is in response to a lawsuit against ICO fraud. This means that ICOs are regulated by US Securities Law.

Austria: The government of Austria will be utilizing the Ethereum blockchain to notarize an auction of €1.15 billion ($1.3 billion) in government bonds. This will be the first time the government uses blockchain technology for domestic financial transactions.

Brazil: The Administrative Council for Economic Defense (CADE), Brazil’s antitrust regulator, is investigating six major national banks including Banco do Brasil for colluding to prohibit access to cryptocurrency services. These banks allegedly closed accounts of crypto dealers and brokers.

India: The Reserve Bank of India (RBI), the country’s central bank, has filed an affidavit in the Supreme Court arguing that cryptocurrencies cannot be recognized as legal currency. RBI believes that cryptocurrencies come with certain risks. Its announcement is legal and effective, and the Supreme Court is unlikely to interfere.

Keeping Up with the Blockchain Giants

September 22nd

Grupo XP, the owner of XP Investimentos, Brazil’s largest independent broker, is planning to set up a cryptocurrency exchange platform to support Bitcoin and Ethereum transactions.

September 23rd

Hakuhodo Incorporated, Japan’s advertising and communications giant, announced the launch of Hakuhodo Blockchain Initiative (HBI) to support and promote blockchain applications, and to build business solutions related to token communities. A report by Accenture stated that integration with blockchain technology will make the semiconductor industry more competitive, and that 88% of corporate executives hope to integrate blockchain tech into their management systems in the next three years.

September 24th

The crypto exchange Coinbase has announced a new policy for listing new cryptocurrencies, allowing almost anyone to submit cryptocurrency listing requests using an online application form, facilitating evaluation under Coinbase’s digital asset framework. Coinbase also has partnered with the cypto trading platform Caspian, aimed at institutional investors, to promote its services to financial professionals.

September 25th

The Australian commercial real estate giant Vicinity Centres will partner with Australian energy startup Power Ledger for a blockchain technology trial. Vicinity will manage energy distribution in real time through a blockchain platform.
Google will completely lift its crypto-related advertising ban, and it plans to allow regulated crypto exchanges to buy ads in the US and Japan.

September 26th

AT&T, the world’s largest telecom company, has created a suite of blockchain solutions for a broad range of industry use cases including supply chain and healthcare. These solutions will enable customers to automate, track and manage various data.

September 27th

The German automaker Porsche has increased its total investment in startups by $176M for the next five years. The investment activities will focus on blockchain and artificial intelligence (AI).
Dell EMC Technologies, a subsidiary of the computer manufacturer Dell, announced that it is planning to invest in emerging technologies including artificial intelligence (AI), blockchain and data analytics.

September 28th

IBM and the listed company Seacamels signed a cooperation contract to build a new smart platform for foreign trade supply chains using blockchain technology. The platform will provide one-stop import and export services for small and medium-sized trading companies and global buyers.

Hot topic of this week: Bitmain Submitted Its Prospectus to HKEX; Watch its Financial Risks

On September 26, Bitmain uploaded its A1 prospectus to the official website of the Hong Kong Stock Exchange (HKEX), officially initiating its listing plan on the main board of HKEX. Founded in 2013, Bitmain started off by manufacturing and selling Bitmain mining machines. In August 2018, it closed its Series B funding round, bringing its valuation to $14.5 billion. Its financial statements show that it earned $742.7 million (approximately 5.1 billion yuan) in net profit in the first half of 2018.

Single Revenue Source

Although Bitmain defines itself as a cryptocurrency mining and chip company, with business lines including mining machine sales, mining pool operations, mine services, and self-operated mines, its financial reports show that mining machine sales account for more than 90% of its total revenue. Such reliance on a single business line is potentially risky.

Bitmain floats its mining machine prices based on crypto markets. As the market goes down, the demand for machines declines, giving manufacturers less pricing power. The price of mining machine falls, and gross margins decline. In such a case, it is doubtful that Bitmain’s profitability and revenues will still be able to maintain current growth.

Volatile Asset Values

In the first half of 2018, cryptocurrencies including BTC, ETH and BCH — valued at $886.9 million, mostly from mining machine sales settled in cryptocurrency — made up about 28.03% of its total assets. Bitmain estimates and records cryptocurrency values using the cost approach, and the cost is calculated using the weighted average. When selling these cryptocurrencies, the gain or loss is determined by the difference between net sales revenue and face value, and is recognized as profit or loss on the date of sale.

In the first half of 2018, cryptocurrency prices took a nosedive. Bitmain estimated an impairment loss of $103 million in its held crypto assets. Crypto assets also risk being lost through hacking. According to the prospectus, it suffered a hacker attack in the second half of 2017, losing $27 million. The price volatility of cryptocurrencies makes it difficult for investors to know the total value of their holdings.

Summary

With the market winter coming, mining machine is in a sell-off crisis. Bitmain’s model, which relies on mining machine sales for most of its revenue, faces many problems. If it succeeds in its IPO, investors should still be concerned about potential risks. Discretion is advised for investments in the risky crypto markets.