Bitmain Pre-IPO Investor Deck Exposes Massive Bitcoin to Bitcoin Cash Swap
As the world’s largest cryptocurrency mining company Bitmain Technologies is filing for an initial public offering (IPO) hoping to raise $18 billion on the Hong Kong Stock Exchange at a market capitalization of $40 to $50 billion, observers are already sending potential red flags to the investors.
According to documents obtained earlier this week by CoinDesk, Bitmain’s proposed public offering could end up being the largest in history.
However, in his tweet on Sunday, August 12, Samson Mow, the CSO of Blockstream, points to the fact that in the last three months Bitmain sold most of their Bitcoin worth half a billion USD for Bitcoin Cash.
The first column, BTC quantity from EOY 2016 to 2017 drops from 70k coins to 35k coins. Doesn’t reveal mined BTC additions from 2017 because they sold off BTC by end of year. What this says to me is they sold entire 2017 mined inventory + 35k 2016 coins to support Bcash peg. Rekt https://t.co/ZZasSuwSri
— Parabolic Trav (@parabolictrav) 12 August 2018
Samson Mow also says that hadn’t Bitcoin Core developers found and disclosed a critical Bitcoin Cash consensus vulnerability, it could’ve wiped a billion dollars off Bitmain’s balance sheets.
The vulnerability in question was initially discovered in April 2018 by Bitcoin Core developer from MIT Media Labs Cory Fields. Referred as “SIGHASH_BUG”, it could potentially result in a chain split making it completely impossible for users to make transactions.
“A successful exploit of this vulnerability could have been so disruptive that transacting Bitcoin Cash safely would no longer be possible, completely undermining the utility (and thus the value) of the currency itself. Instead, the vulnerability was fixed without incident, and publicly disclosed on May 7, 2018,” Cory Fields wrote in a blog post.
Bitcoin Cash is a cryptocurrency that is distinct from and incompatible with Bitcoin. It is named as such because it is derived from Bitcoin. The now-fixed bug only affected Bitcoin Cash; the only relation to Bitcoin is the similar name.
Samson Mow elaborated on his findings adding:
“The Bitmain IPO is incredibly risky for any investor to buy into. The potential for massive losses is just around the corner as they have no idea how to maintain BCH, but are all-in. Play stupid games, win stupid prizes.”
A user writing under the handle @ProfLastBattle also mentions that “selling just 30k of BCH will destroy the whole orderbook on Bitfinex,” adding that “there’s absolutely no way they can sell it.”
“I guess that is why they want to IPO? They can’t sell their assets, but if they can sell stock then they won’t need to! They have to IPO before the next quarterly report to get a higher valuation, as BCH was down over 80% from a few months ago (march 2018),” he added.
Beijing-based Bitmain is headed up by 32-year-old Jihan Wu, who founded the company only five years ago. Earlier this summer, Bloomberg reported that Wu was considering taking Bitmain public with a vision to position the company as a ruthless competitor in the circuit chip industry.
So far, Wu’s pursuit has proved successful: Bitmain has become one of the world’s most valuable cryptocurrency companies and recently began to manufacture chip hardware for the artificial intelligence industry. In the first sixth months of 2018 alone, Bitmain raked in $2.5 billion in revenue. The company has also received $450 million in funding from investors including Sequoia, GIC, and IDG Capital.
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