Chinese cryptocurrency mining company Canaan Creative took its company public late last month, with many people having high hopes for it to succeed where other names in its field- including and especially top rival Bitmain- failed. However, the company hasn’t had much in the way of progress since then, as its stock price has continued to slump in the aftermath of going public.
Research: Canaan Creative’s ASIC miner market share has grown from 6% to 22% over the past two years.
— MISSLIN Quentin (@MisslinQ) December 18, 2019
It is worth noting that in its Initial Public Offering (IPO), Canaan was only able to net $90 million. It sold 10,000,000 shares for $9 each, eventually arriving at a number that is about 75 percent less than the $400 million that it had initially hoped to raise when it first announced the IPO plans.
Canaan’s IPO Bust
One of the biggest contributing factors to this slump was the loss of its biggest banking partner- Credit Suisse- which pulled out of the deal just a week before the sale occurred. The firm immediately made adjustments to its filing, submitting a new one that didn’t mention Credit Suisse at all and which showed an expected revenue haul of $100 million. t
In 13 of the 17 trading sessions that have transpired since Canaan went public, the company’s stock has plunged significantly. This week alone, the price has slumped a further 35 percent.
The fall in its stock price is coming at a time when the Bitcoin value is reducing by the day. Data from CoinMarketCap shows that Bitcoin has dropped 4.8 percent on the day, and is trading well below the $7,000 comfort point now. Bitcoin has dropped consistently since the month began, and all hope of the asset finishing the year above the $10,000 threshold is currently fading by the minute.
Bitcoin’s Slump is to Blame
As expected, the reduction in the value of Bitcoin has affected mining companies, and Canaan isn’t the only one trying desperately to weather the storm. Bitmain, still the industry leader, has announced several initiatives to bolster its sales, including renting out its second-tier products under profit-sharing agreements and providing limited price guarantees to buyers who make bulk purchases.
As Bitcoin’s price reduces and the asset becomes less profitable to mine almost every passing day, miners are starting to get iffy about buying mining rigs, and these companies are beginning to realize that they might be heading for the same dire financial situation that they experienced in early 2018.
It is worth noting that the hash rate is still stable. Data from Blockchain shows that the hash rate is standing at 100.4 million TH/s, and while it’s a bit less than the all-time high of 114 million TH/s, it at least shows that activity on the network is laudable. It’s just a matter of time before rigs begin to lag once more.
Canaan is set to release the AvalonMiner 11 series next year, but analysts expect it to be less power-efficient than the available Bitmain s17+ model. If the Bitcoin price slump stretches on, buyers could be more incentivized to get mining rigs that have lesser power output, and which will cost less. However, there’s only a level that buyers can take before they cut back on mining rigs altogether.