It is always raining uncertainty on the crypto landscape, but the issue with Bitmain, just like FTX, is one that crypto analysts saw coming. Of course, these analysts are students of the principles and criteria of valid inferences and demonstrations within the crypto ecosystem. So, the recent turnouts of events have plunged notable crypto companies into seas of financial crises. And this has inadvertently spurred changes in leadership amongst heads of these said crypto firms.
The Current Situation With Bitmain
- Bitmain, one of the world’s largest crypto mining manufacturers, is in the muddy waters of financial straits. This is according to a new report by a notable crypto research firm, Nansen. So, this report, made on October 10, 2023, gave details of Bitmain’s high debt level, dwindling market share, and negative cash flow.
- Given the recent FTX collapse, it is concerning that Bitmain is threading the same path already. So, FTX had in November 2022, filed for bankruptcy. This is after the revelations of its involvement in fraudulent activities. So, the unfolding of the events in association with FTX, broke into pieces the slim shreds of confidence buried in the sands of the crypto ecosystem. Many feared that other crypto companies might head that way.
- The Nansen report revealed Bitmain’s 2022 negative cash flow of $1.5 billion; this simply translates to their generated revenue being way below their spent funds. So, an accumulation of factors contributes to this. The main culprit for this is their new business areas expansion, especially trading and cryptocurrency mining. Also, Bitmain’s market share is declining from way above 70% in 2017 to below 50% today. This decline is traceable to compounding competition from other Chinese mining hardware manufacturers. So, it’s bad that all of these are adding to Bitmain’s already existing financial problems.
What Could Happen To Bitmain’s Future?
- Bitmain’s current financial woe is a strong pointer to the potentiality of its bankruptcy, just as FTX. However, strategic moves can be made to avoid this from happening. So, should they raise money from investors? That would be quite difficult given the current market state. On the flip side, selling off some of its assets, such as its crypto mining farms, would help in slashing down the company’s debt level. So, this will possibly bring about cash flow stability.
- Another area Bitmain is looking at is how to cut down the company’s workforce and temporarily close some of its operations. So, a report from Coinmarket has it that some Bitmain workers are not receiving their salaries for two months. In conclusion, if other strategies are not employed to pull important strings, significant challenges will surely surface in the long run. All thanks to the cyclical nature of the crypto-mining industry.
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