Bitmain, Canaan and Ebang, three of the biggest names in the crypto mining industry are getting ready to launch their IPOs. The move into the stock market could mark the big arrival of cryptocurrencies into the mainstream. However, experts are now doubting whether the timing of these stock market debuts is right.
Mining Giants Eye the Stock Markets
Mining is a process central to several cryptocurrencies. Just as the central banks use their authority to issue currencies in a country, miners use their hashing power to “mine” new coins and get rewarded for the same. Interestingly, three of the biggest names in the crypto mining industry are Bitmain, Canaan, and Ebang and all of them are from China where the government has a strongly hawkish stance on these coins.
Now the three companies are looking to raise billions of dollars through IPOs in Hong Kong. Stock markets are falling worldwide currently, and China hasn’t remained unaffected by it. Moreover, the world’s primary cryptocurrency Bitcoin has also slumped in value from $20,000 to just above $6,000, and these bear markets may not have finished.
The crypto market remained relatively uncorrelated from the stock market carnage during last week. However, it is a volatile industry and prices are known to fluctuate aggressively. Even Bitmain warned potential investors last week about the volatility saying:
“If the market price of cryptocurrencies suddenly falls … demand for our mining hardware and cryptocurrency mining services will also drop rapidly.”
The Problems Don’t Stop Here
China and US are locking horns over trade, and China is experiencing an economic slowdown. The Hong Kong stock market, where the three companies plan to enlist has plunged over 20 percent.
Benjamin Quinlan, the founder of a Hong Kong-based financial services consulting firm Quinlan & Associates, noted why these firms might go the IPO route. He said:
“These firms might be looking to cash out before the market takes an even steeper nosedive.”
The need to cash out isn’t about losing faith in Bitcoin, it looks to a larger problem. As cryptocurrencies become mainstream, governments are pushing to regulate the ecosystem. China has continued an extensive and aggressive anti-crypto campaign for the past one year. Even in the US, public utilities are increasing electricity rates to hurt miners.
With increasing costs of mining and impending regulations, the crypto mining industry could face hard times in the future.