HONG KONG (Reuters) – Bitcoins are worth less than half of what they were in December. Mining them is 60 percent less profitable than it was in 2017. Even retailers of hobbyist mining rigs say they are seeing fewer customers.
Why, then, is Canaan Inc, a leading cryptocurrency mining rig supplier, looking to raise up to $2 billion, according to two sources with knowledge of the deal, in the world’s biggest bitcoin-focused initial public offering to date?
Canaan is expected to present itself to investors not so much as a bitcoin company, but as a chip designer focused on developing other markets in artificial intelligence and blockchain, the electronic ledger that underpins bitcoin.
“Their customers happen to be bitcoin miners. But they are a chip company, not a bitcoin company,” said one of the sources. Both declined to be named because information about the IPO has not yet been made public.
The offering for Canaan, which claims to be the world’s second-largest bitcoin mining hardware supplier, is scheduled for July, the sources said. Canaan declined to comment.
The Beijing-based company’s profits rose seven-fold last year to 361 million yuan ($56.67 million), according to its prospectus, as bitcoin’s soaring price drove a surge in demand for its products, sold under the AvalonMiner brand.
But the effects of bitcoin’s volatility and rising mining costs can be seen in the shops of Sham Shui Po, just a few kilometres from Hong Kong’s central business district, where the IPO has been filed.
Businesses selling mining rigs there said demand – especially for high-end machines – was limping along.
Alvin Wong said the only rig in his Hong Kong electronics store this week was plugged in underneath the cash register, busily crunching numbers in search of profit. “Since we weren’t selling the miner, we thought we might as well use it,” said Mr Wong, a sales representative at Centralfield, in the Sham Shui Po computer district.
The change has come suddenly. Just a few months ago, demand for bitcoin mining gear in Sham Shui Po was booming.
