Bitmain is the largest manufacturer of cryptocurrency mining equipment in the world, and it has been taking the brunt of the mining downturn associated with the continuing bear market.
Two weeks ago, Bitmain announced it would be firing more than half of its 3,000 employees. Now, it has been revealed that the co-founders of Bitmain, Jihan Wu and Micree Zhan, are stepping down, and it appears Wang Haichao will be the new CEO.
Wu and Zhan will stay on as co-chairs, meaning they will stop being involved in day-to-day activities, but major decisions will have to be approved by them. This unexpected shift in power is perhaps the result of the triple failure of the Bitmain IPO not happening, Bitmain’s investment into Bitcoin Cash (BCH) turning into a big bust, and the overall crash in the crypto mining industry, which has caused sales of Bitmain’s mining equipment to dry up.
Bitcoin’s (BTC) hash rate peaked near 60 EH/s in August, September, and October 2018, before rapidly declining to as low as 32 EH/s in December. This indicates that up to half of all Bitcoin mining rigs were shut off at a point due to lack of profitability, which further suggests that cryptocurrency mining rig manufacturers like Bitmain probably saw their sales dry up and were stuck with huge inventories of rigs they could not sell. Essentially, the very lifeblood of Bitmain has been cut off.
It gets worse. Bitmain dumped most of its Bitcoin (BTC) to buy Bitcoin Cash (BCH) and had amassed over one million Bitcoin Cash (BCH) by the end of March 2018. On New Years Day 2018, Bitmain already had 842,000 Bitcoin Cash (BCH) when Bitcoin Cash’s price was $2,500, corresponding to a total investment of $2.1 billion.
Since Jihan Wu was an avid supporter of Bitcoin Cash (BCH) during the fork in November 2018, it’s possible that Bitmain held onto their stake in Bitcoin Cash (BCH) all the way through the fork, which would mean they have lost $2 billion. The potential losses from Bitmain’s Bitcoin Cash (BCH) investment far exceed the $952 million profit reported in 2017, which was probably by far their best year.
Bitmain received at least $400 million of “pre-IPO” investments in 2018, and this cash and all of their previous profits appears to have been burned through, considering that they are laying off over half of their employees, entire divisions are being shut down, and now the CEOs are stepping down. This was likely precipitated by sales drying up and the catastrophic Bitcoin Cash (BCH) investment failure. Now it appears there will be no IPO according to an announcement by Hong Kong regulators, which is no surprise considering Bitmain’s dire straits.
It is no surprise that Bitmain is opting to change its leadership as seen with the stepdown of Wu and Zhan. Bitmain started as a massive crypto success story under their leadership, but clearly, Bitmain’s strategy in 2018 has nearly destroyed the company.