Chinese company mines cryptocurrency under the shadows; loses 90% of its valuation amidst crypto-winter

Since the emergence of decentralized currency, China has been the focal point of cryptocurrency mining. With the market falling to the “crypto-winter” in 2018, several miners suffered severe setbacks due to the plummeting market.

Huatie HengAn, a Chinese construction company which ventured into cryptocurrency mining due to its lucrative appeal has seen its valuation drop by 90 percent due to the bear market. A local Chinese media outlet 8BTC reported that the subsidiary of Huatie, was sold for a mere $2 million, in comparison to its valuation of $25 million.

The report added that Huatie HengAn engaged in rental service of cloud computing server, purchasing over 36,500 units of “servers” in the previous year. The report further cited that the construction company purchased the “servers” from Ebang and Avalon, however, since the two are crypto-mining manufacturers, it was presumed that the “servers” in question referred to mining hardware.

Given the freefall of the crypto-market after the highs of January 2018, Huatie HengAn saw their investment drop significantly. 8BTC further added that the prominence of the sale was because the company could be “the first listed company in the country revealed to be engaged in crypto business though it may operate under the name of cloud computing”.

Based on the company’s financial report dated December 31, 2018, the loss of the year amounted to $14 million, while the collective coin market dipped from over $800 billion to under $105 billion. The reported loss was over 50 percent of its initial investment of $25 million and over 25 percent of its total revenue.

To make matters worse, in the first two months of 2019, the aforementioned loss increased to $23 million. Huatie HengAn is left with net assets to the tune of $2 million only.

It has not been confirmed by the company that their intention was to mine cryptocurrencies following their acquisitions of the “servers”, however, given the mining companies in question and the correlation of the loss to the crypto-market’s downtrend, many have opined that crypto-mining was indulged in.

The “crypto-winter” has resulted in a slew of downturns in the mining industry within Asia. The Hong Kong Stock exchange [HKEX] failed to further the IPO application filed by mining equipment manufacturing giants, Bitmain, Canaan, and Ebang, citing industry volatility.

Nvidia, the manufacturer of GPU used by miners sank to become the worst performer on the S&P500 in December 2018. In the final quarter of 2018, the company’s share price dropped by 54 percent to $21 from $129.57, with Jensen Huang, the CEO of Nvidia crediting the same to the “crypto hangover”.

Lastly, miners in China could be looking to move elsewhere to pursue their trade as the Chinese government tabled a proposal to ban cryptocurrency mining in the country. The proposal was fronted by the country’s macroeconomic policy institute citing the mining production’s excessive energy consumption. The proposal is under public consultation till May 7.

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