There were controversies in the Bitcoin Cash community (BCH) last weekend, when more rumbling appeared on a Bitcoin ICO.
How does the ICO affect BCH? Why is there a controversy? Today we are informing you of everything you need to know about Bitmain's potential IPO and the Bitcoin Cash controversy, including information provided by Crypto Herpes Cat in a blog post on Media that has covered the problem extensively.
Tweets analyst Bitmain Presentation of the pre-IPO investor's deck
The controversy began when Samson Mow tweeted a slide from Bitmain's pre-IPO investor cluster. That slide was written entirely in Chinese but provides valuable information on the company based in China.
In particular, the slide shows that Bitmain sold most of their bitcoin (BTC) for Bitcoin Cash when BCH was priced at $ 900 for BCH.  "At $ 900 / BCH, they have lost half a billion in the last 3 months," explains Samson Mow.
BCH has been sinking since March, and this has clearly affected the value of Bitmain substantially. By keeping most of their cryptographic funds in BCH, they are exposing themselves to a potential problem if BCH is in trouble.
BCH could encounter problems? Absolutely. In fact, a devastating exploit has been quietly solved at the beginning of this year – but only because an outside developer has identified exploits.
Bitcoin developers alerted BCH developers to a devastating exploit
BCH may have been struck by the worst news in its history week when a bitcoin core developer revealed how he alerted the BCH team to an exploit devastating.
Recently we have discussed the issue in a comprehensive way. Basically, what happened was a huge change in the BCH protocol obtained with little discussion on GitHub. This change has rewritten a huge amount of BCH code. A core bitcoin developer has analyzed the update and found an exploit within 10 minutes. This exploit would allow exploiting BCH transactions, paralyzing the network and potentially killing BCH. The developer warned the BCH team of the problem and the exploit was repaired.
The problem with this exploit, of course, is that Bitmain holds much of its value in BCH. If this exploit had not been properly corrected, then Bitmain could have lost its entire cryptographic properties.
"If the Bitcoin Core developers did not reveal Bcash's vulnerability, they could have erased a billion dollars from their budgets," explains Samson Mow on Twitter.
The IPO of Bitmain is a risky investment due to the large companies of BCH Holdings
Bitmain is one of the most profitable and intriguing companies in the world. However, Mow believes that investing in a Bitmain IPO is a bad idea.
"The Bitmain IPO is incredibly risky for any investor.The potential for huge losses is behind the corner because they have no idea how to keep BCH, but they are all-in. Play stupid games, win stupid rewards. "
The investor slide published above also highlights another interesting point: Bitmain claims to hold 11% of all outstanding Bitcoin Cash. Previously it was believed that this was true (as outlined by Crypto Herpes Cat in a blog post on March 1). However, we now confirm.
Bitmain made a "monumental error" during the swapping of BTC for BCH
There is an ongoing debate about what the investor slide mentioned above means for Bitmain. Some believe it simply indicates that Bitmain's mining profits are now paid in BCH – not BTC.
Others, however, believe that Bitmain has traded almost all of its BTC portfolio for BCH. This decision, if it were true, would have been a "monumental mistake", as explained by Crypto Herpes Cat.
A Twitter commentator has compared you to selling your gold "in exchange for yellow plastic".
However, it seems Bitmain may not have actually traded BTC for BCH. They may have just picked it up through normal business over time. Here are some of the ways Bitmain has collected so much BCH in the last year:
- Bitmain held BTC on August 1 and received BCH coins because of the fork.
- Bitmain is a main miner (they execute Antpool). Some suggest that Bitmain also manages "Unknown" mining pools. Bitmain, through mining operations on Antpool, was able to raise a large amount of money in Bitcoin through ordinary mining activities. They did not sell this BCH.
- Bitmain allegedly used the Emergency Difficulty Adjustment (EDA) to "undress my" BCH.
- Bitmain accumulated large amounts of BCH through their hardware business (sale of miners and ASICs). These profits were traced to two "sales portfolios". Bitmain did not sell coins in these portfolios.
- There were suggestions of artificial price support and pumping in exchanges, increasing the price of short-term BCH.
- Bitmain had an initial policy of hoarding BCH and not selling BCHs on the market as they would with their other cryptographic holdings.
All these actions – at least according to Crypto Herpes Cat and other critics of Bitmain – have led Bitmain to accumulate a huge amount of BCH.
Bitmain has accumulated so much BCH that it is becoming a problem – and not just because the value of BCH has been halved in the last three months.
How does Bitmain's IPO affect?
How does any of this information influence Bitmain's IPO? Crypto Herpes Cat lists two key points that have occurred since the previous slide to the IPO ended March 31, 2018:
- Bitmain attempted to try to divest their holdings into BCH and make profits on their coins detainees
- Bitmain has continually tried to create their ASIC SHA256 next gen
These are described as "two very important pieces of the puzzle."
Bitmain is trying to disintegrate its holdings
It is believed that Bitmain is trying to disinvest their holdings in BCHs of selling coins on the market. However, the Bitcoin Cash markets are not liquid enough to absorb the number of coins that Bitmain continues to hold (about 700,000 BCHs).
The BCH OTC market is small compared to the OTC OTC market.
As a result, "Bitmain is stuck with these coins or threatens to unload the entire market and damage the currency permanently."
Bitmain is believed to have been able to sell 20% to 25% of its holdings in BCH. It is also believed that they are selling some of their BCH extracts.
BCH is sliding towards new lows, and the opportunity cost of not extracting or holding BTC is always at its best. This means that it has become increasingly difficult for Bitmain to cede its holdings.
The Next Generation Antminer
Withholding too many BCH coins is just one of the problems that Bitmain has to contend with. The other problem is that they are struggling to maintain their competitive edge on the mining encryption hardware market.
The fact is that we have not seen a new Antminer for a while. Is Bitmain struggling to produce the next generation of Antminer? Crypto Herpes Cat definitely thinks so. He also believes that the company is having problems developing its AI mining algorithms:
"We have a pressure on the side of the hardware, things are not going so far with their artificial intelligence efforts. efforts for artificial intelligence, remember the Bitmain B3 miners who were created specifically for an algo PoW who was friendly with AI ASIC chips? "
We are still waiting for the Antminer S11 – or any other Bitmain's SHA256 miner would be
All this suggests that Bitmain may be launched towards an IPO for "Exit to end all outputs"
Finally, Crypto Herpes Cat arrives at the main point: because of all the information listed above, Bitmain is rushing to an IPO.
An IPO of Bitmain is "the output to terminate all outputs" according to Crypto Herpes Cat:
"You have a huge cache of BCH that has no liquid markets and no OTC demand. ASIC losing value while ROI decreases on Antminer S9 and the BTC drawback difficulty continues to rise.You are burning capital to try to develop an S11 (or the next miner SHA256) .You have a transition, so far, failed in the market. 39; IA. You have a persistent bear market. "
For all these reasons, Bitmain is presumably seeing an IPO as a way to" unload the baggage "and download their low-value cryptocurrency.
"It will be the exit to finish all exits," sums up Crypto Herpes Cat.
Ultimately, Bitmain and Bitcoin Cash have many critics. Crypto Herpes Cat is one of these critics, and cites evidence to suggest that BCH is in trouble, including evidence dating back to March 1 that a large amount of BCH was controlled by a company – Bitmain. That company is now struggling to disinvest its holdings in BCH while it is also struggling to innovate in the crypted hardware space. This could be a big problem for Bitmain – and a big news for a potential Bitmain IPO.
The full review of Crypto Herpes Cat is worth reading here.