Bitmain on verge of losing chip supplier, debts mounting

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We have heard from multiple sources close to Bitcoin mining manufacturer Bitmain that the company is no longer receiving chips from its chief supplier Taiwan Semiconductor Manufacturing Company TSMC.

Bitmain’s account with TSMC is reportedly in arrears to the tune of over $300 million. Bitmain owed TSMC $1 billion but could only manage to pay $700 million and is unable to pay the remaining debts.

This news comes just two months after market research firm Sanford C. Bernstein & Co published a report suggesting the Chinese ASIC manufacturer’s prospects were so dire that TSMC should abandon favourable credit terms with Bitmain.

We have yet to receive a response from TSMC regarding Bitmain’s debts, but our sources tell us that it’s unlikely TSMC will continue to do business with Bitmain even if they are able to make their debt payments.

“If TSMC continues to do business with Bitmain, they’ll require a good behaviour bond. Their chips will slow to market as they won’t start work until they’ve received payments for future orders in full.”

Allegedly, Bitmain is contemplating reaching out to Korea’s Samsung to make a chip deal, but such a deal would likely be dead in the water as Samsung has no interest in working with any company that has burned their past suppliers.

According to our source, Bitmain’s CEO Jihan Wu is running out of time to pay off the company’s debts. With close to a quarter of a billion dollars owed to other accounts, he has less than six months to make his creditors whole.

The company’s IPO seems more in doubt by the day after analysts have picked apart the misinformation and lies written in their prospectus.

Hash war rages on

In his effort to win the current hash war happening on the BCH chain, Wu is apparently renting hash power from BTC miners (such as those in pools controlled by Bitmain – Antpool and BTC.com) and moving that hash temporarily to the BCH chain .

This will require that when one of these mercenary miners mines a block, Bitmain must pay them in BTC coins (which are guaranteed to be liquid), rather than in BCH coins. The amount paid in BTC would be the approximate monetary amount a miner would have earned (in 12.5 coins block reward and transaction fees) if their hash was still mining on the BTC chain, plus some incentive amount for temporarily renting their hash. 

While Bitmain could receive back the BCH block rewards mined by that rented hash, the BCH payouts will be worth significantly less in monetary value than what Bitmain will be paying out in BTC. With BCH currently in the $550 range and BTC a little over $6200, this hash-renting is very expensive, could easily cost Bitmain millions of dollars per day, and will only exacerbate Bitmain’s massive debt load.

We’re watching the beginning of the end for the once mighty Bitmain. The group that was the dominant force in the crypto industry is now burdened with corporate and personal debt, losing suppliers and clinging to the hopes their wormhole boondoggle pays off.