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Crypto meets Wall Street as Bitcoin Mining Giant Bitmain Files for IPO

Bitmain Technologies Ltd., the world's largest cryptocurrency mining company, is planning to build an initial public offering in Hong Kong, one of the first major cases where traditional capital markets and the latest cryptocurrency world They collide.

The company's financial statements, which were issued in a 438-page deposit with the Hong Kong stock exchange, confirmed the intention of Bitmain to publicize an agreement that analysts and investors have said could increase billions of dollars. But the potential offer comes at a difficult time for both cryptocurrency and public stock markets.

Bitcoins and other digital currencies have lost around two-thirds of their value this year after the 2017 maniac.

Meanwhile, Hong Kong was one of the worst stock markets in the world, down 16% from the January high. And while Hong Kong hosted a large number of IPOs this year, many, including Chinese smartphone maker

Xiaomi
Corp.

and launching the Internet

Meituan Dianping

-He struggled to keep the initial gains.

Bitmain, founded in China five years ago by billionaires Jihan Wu and Micree Zhan, declared in its first public deposit that it generated 2.8 billion dollars in revenue in the first half of 2018, an increase of almost 10 times compared to a year ago. Profit increased similarly, to $ 742.7 million from $ 83 million.

The company held $ 886.9 million in cryptocurrency activities until the end of June, from $ 56.3 million at the end of 2016 and $ 12.3 million in the prior year. By comparison, its cryptographic assets more than doubled its $ 343.3 million in cash and cash equivalents, according to the deposit.

Bitmain has not revealed an evaluation goal or how much money he hopes to gather in the offer. It is expected to arrive at a later deposit with the Hong Kong stock exchange.

The company is a dominant player in the sale of cryptovalute extraction equipment and offers computer chips and equipment related to other miners. Analysts at Sanford C. Bernstein & Co. estimate that Bitmain controls 85% of the crypto-mining chip market, but this figure may suffer as rivals such as Canaan Inc. and Ebang International Holdings Inc., which both have intentions to go public in Hong Kong – expand their offers.

The Bitmain IPO will prove to be a test for other cryptocurrency and blockchain companies that may consider exploring their IPOs. The blockchain technology serves as a background for bitcoins and other cryptocurrencies.

Bitcoin cryptocurrency has a problem as old as money itself: theft. And this is giving rise to a new profession: bitcoin detective like Kim Nilsson, a victim of the Monte massif. Gox exchange. Photographic illustration: Heidi Gelover / The Wall Street Journal

Many of these startups have generally preferred a more controversial fundraising method, called an initial coin offering, a hybrid of an IPO and a crowdfunding campaign. These companies create bitcoin-like digital tokens and sell them to the public, often before they even developed or released a product.

"I think this world amalgamates over time," says Eric Ervin, managing director of Blockforce Capital, a San Diego-based asset management company that focuses on digital assets and blockchain technology. "For a company of this size like Bitmain, it will probably get a better rating on a huge deal like this in traditional markets than an ICO, especially in today's market."

One of Bitmain's largest holdings is Bitcoin Cash, a bitcoin offshoot launched in August 2017. Bitmain's co-founder, Mr. Wu, was a big advocate of technology, believing that Bitcoin Cash would solve problems, including speed of transactions, which prevented bitcoins from becoming a traditional payment instrument.

Bitcoin Cash has recently increased by more than 20% following the deposit of Bitmain, according to the CoinMarketCap research site. Even so, it is down about 80% for the year as investors have questioned its use case. Analysts said that Bitmain's Bitcoin Cash holdings may prove to be a liability in the future.

Bitmain may need to note the value of his inventory, Bernstein analysts wrote in a research note last month, noting that the company's computer chips that fuel digital currency transactions are facing increased competition in a difficult market because the value of cryptocurrencies has decreased dramatically.

"Last year was not a wild success," said Bernstein. "However, Bitmain's cash flow seems to be questionable and the company could gradually lose the technological advantage."

Write to Steven Russolillo at steven.russolillo@wsj.com

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