Reports that bitcoin mining manufacturer Bitmain is planning an $18 billion IPO reignited talk about blockchain unicorns, those startups worth more than a billion dollars.
But the planned IPO, which has not been formally announced, is just the latest sign suggesting that large-scale investment in the blockchain world continues to grow, even as traditional technology companies double down on their own experiments.
If Bitmain’s IPO goes as planned, the Chinese company’s valuation would be between $40 billion and $50 billion.
According to a report by Outlier Ventures, a record $1.8 billion in venture capital flowed into blockchain ventures in just the first half of 2018, a more significant portent than the current decline in cryptocurrency and token values, said research analyst Joel John.
“Despite the negative sentiment and token bear market, if you scratch under the surface, the broader blockchain ecosystem is experiencing rapid growth and maturation,” John wrote in a recent post. “This quarter has provided that institutional capital, enterprise, and regulators are all coming round to blockchains and cryptoassets.”
Bitmain Going Big
Bitman’s proposed $18 billion IPO isn’t just big for the cryptocurrency space. Adjusted for inflation, it would be among the largest IPOs in history, including Facebook’s $17 billion IPO. If Bitmain’s IPO goes as planned, reportedly in September, the Chinese company’s valuation would be between $40 billion and $50 billion.
It’s easy to understand why. Along with manufacturing mining equipment “busy selling wagons to the wannabe digital 49ers,” as one Twitter user put it, Bitmain operates its own mining operations and mining pools, which have contributed to profits reportedly exceeding $1 billion in just the first quarter of this year. In addition, Bitmain has made a well-publicized push into artificial intelligence, arguably to diversify the focus of the company. But its impact in the mining sector is undeniable.
“Imagine if Standard Oil, with its monopolistic production, had access to futures and produced almost all the drilling equipment for their competitors. That’s Bitmain,” another Twitter user opined.
Bitmain isn’t the only blockchain company whose investment activity is driving 10-figure valuations. Last week, a Chinese private equity firm announced plans to invest $270 million in online retailer Overstock’s tZero blockchain subsidiary, following an earlier $160 million investment by a U.S. venture capital firm. Forbes calls it the largest single investment in a blockchain startup, and with additional investments from other players it would give the company a valuation of $1.5 billion.
It would also make the subsidiary, which is developing regulated token exchanges, worth more than its parent company, even after Overstock’s own publicly traded stock rose following news of the tZero investment, giving it a market cap exceeding $1.3 billion.
Established Investments
Just as important, traditional tech giants continue to invest in the space. IBM, for example, now has nearly 700 employees dedicated to blockchain, according to research by Loup Ventures.
Outlier Ventures notes other significant trends that suggest the cryptocurrency sector is maturing: The growth of “mega rounds” of investments, the 30 mergers and acquisitions during the first half of the year, and the use of tokens to acquire existing companies, such as Tron’s July acquisition of BitTorrent.
Among investors, the current dip in token values appears to have shifted the balance to institutional investors, the Outlier report states. “As traditional finance has moved in, retail investment has dipped,” John writes. “The ecosystem is maturing. It is growing, becoming more diverse, and serving more use cases than ever. It’s an exciting moment if you can ignore the markets.”
