Hidden Liabilities in the Bitmain IPO
Analysts warn that the prospectus conceals a concentrated exposure to Bitcoin Cash. Bitmain retains close to one million BCH. A forced liquidation at current prices would crystallise a loss that exceeds half a billion US dollars.
Samson Mow, Blockstream Chief Strategy Officer, circulated a chart on 11 August 2018. The chart traces Bitmain's BTC balance dropping from 71,560 in December 2017 to 2,210 in March 2018. During the same interval the company's BCH balance surged from 841,000 to 1,021,000. The swap occurred when BCH traded near 1,650 USD. By mid-August 2018 the coin changed hands at 540 USD - shrinking the position's market value from 1.68 billion USD to 550 million USD.
Bitmain's own filing states that the firm âhas not sold any mined BCHâ. Instead it redirected hash power away from BTC toward BCH acquisition - incurring electricity and wafer costs that exceed the coinsâ present market value.
Bitcoin Cash daily volume on major exchanges averages 350 million USD. A single sell order of 750,000 BCH would absorb more than twice the average daily demand. Over-the-counter desks refuse blocks larger than 10,000 BCH. Bitmain has off loaded roughly 250,000 BCH through small exchange orders and employee bonuses priced at a discount. The remainder sits in cold storage. Any attempt to accelerate disposal would push the price below 400 USD - deepening the impairment.
Subscribers to the IPO purchase shares whose intrinsic value hinges on the liquidation schedule of three quarters of a million illiquid coins. The prospectus omits a concrete plan for orderly divestment.
Cryptocurrency and token purchases carry extreme volatility. The author held BTC but also XRP at the time of writing. Consult a licensed financial adviser before committing capital.
