Ongoing layoffs at cryptocurrency mega-firm Bitmain could start a fresh wave of selling in Bitcoin Cash and Litecoin markets, according to prominent crypto investor Kyle Samani.
The cryptocurrency-focused venture capitalist said in a tweet that the Bitcoin mining giant is — if rumors are true — running out of money to continue its operations across mining and blockchain development. The financial scarcity has led the Chinese firm to downsize its workforce, reportedly by 50 percent or more. And to further meet its ends, Samani said Bitmain would likely dump its crypto stockpile, which includes a massive number of Litecoin and Bitcoin Cash tokens.
Samani’s bearish theory is based on Bitmain’s alleged financial report which was leaked in August this year. If genuine, it revealed that the company was holding close to 931,000 Litecoin (LTC) and 1 million Bitcoin Cash (BCH). According to the current rates, Bitmain must be holding circa $28.6 million in LTC and a whopping $177 million in BCH. The company, up to the time of this writing, has not verified the leaked financial document.
The leaked document also shows Bitcoin, Dash, and Ethereum as a part of Bitmain’s portfolio, with holdings close to $84 million, $26 million, and $142,000, respectively. Combined, Bitmain has $316 million worth of cryptocurrency reserves, providing the company hasn’t dumped even the slightest portion from it since August.
Bitmain, according to reports, has fired the entire Copernicus team which was working on the development of a new Bitcoin Cash client. The move comes after the mining giant backed the Roger Ver-allied Bitcoin Cash ABC to fight an expensive hash war against its forked cousin, Bitcoin SV. Though not confirmed by Bitmain, allocating vast amounts of computing power to assist the BCH network could have led the company to face millions of dollars worth of monetary damages. On top of that, the per token value of Bitcoin Cash also dropped by more than 60% since the beginning of the hash war November.
BCTKING555, a Twitter account which mainly posts negative reports and rumors about Bitmain, claimed that the company had privately reported $740 million worth of losses in Q3 which doesn’t even include the damages incurred during the Bitcoin Cash fork. Citing publicly-available data, BitMEX Research also estimated that Bitmain likely posted significant losses in Q2 following a wildly-successful first quarter.
The events could put Bitcoin Cash under the bearish spotlight, hinting that retail investors would be less likely to find the project stable.
The Bitmain layoffs could stabilize its outflows against the reported losses in the near-term. Also, the company has sought approval to hold a historic IPO in Hong Kong. However, recent reports indicate that HKEX regulators are not satisfied with the state of the crypto industry. Thus, some believe HKEX might reject the IPO for backing a product which they believe is too nascent.
With all the doors closed, the next step for Bitmain could be to reach out to venture capitalists for additional funds or, as Samani predicted, sell some portion of their digital assets. The company still maintains more than 60% of the overall crypto mining market.
Featured Image from CoinGeek/YouTube
Last modified: May 20, 2020 1:19 PM UTC