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Vijay Boyapati @real_vijay
, 14 tweets, 4 min read Read on Twitter
1/ The most important news in the "cryptocurrency space" today is the gigantic IPO that @BITMAINtech intends to complete this year.

But even more astonishing is one of the details buried in their IPO filing. Let's consider the implications:
2/ It's now clear that Bitmain entered one of the worst trades of 2017 by converting a majority of their mined #Bitcoin to BCash tokens to prop up the price of that alt-coin:

3/ For those who don't remember, this was the consequence of Bitmain's attempt to alter the Bitcoin block size with the failed 2X fork in August 2017.

After the failure of 2X, @JihanWu pursued a policy of creating a miner-controlled alternative to Bitcoin: BCash.
4/ The creation of BCash was based on the fear that if Bitcoin were to scale using second layer technologies (such as Lightning Network), Bitmain's profits through mining fees might dwindle.

Jihan's solution was to attempt to replace Bitcoin with Bcash.
5/ A tiny but vocal group have tried to convince unsuspecting investors that BCash "is" Bitcoin. Market forces would have quickly shown this false narrative to be ludicrous except for one thing:

Bitmain propped up the price of BCH giving some small credence to the narrative.
6/ A few months ago I pointed out that if BCash were to drop below 0.1 BTC it would suffer a catastrophic loss in credibility. @JihanWu responded to this tweet directly.

Why would a billionaire owner of the most powerful mining company on earth respond to a nobody?
7/ The answer is that the tweet hit a particularly sore spot for Wu. Namely the horrendous trade he made in switching BTC for BCash; a liquid and widely saleable currency for a highly illiquid one.

In making this trade he was cornering BCash:

8/ Bitmain is sitting on paper losses of hundreds of millions of dollars from this botched trade. But even worse, they have no ability to exit their billion dollar position in BCash without a complete collapse in its price.
9/ Bitmain's financial machinations resemble a failed state attempting to prop up its currency by selling its foreign reserves to maintain a price peg. In this case, BTC was Bitmain's foreign currency reserves, and their collapsing currency is Bcash.
10/ The inability to sell their BCash position is a huge problem for Bitmain because of the capital intensive nature of the business they are in. This will become particularly important as other chip manufacturers enter the mining market.
11/ The upcoming IPO is one way of untangling themselves from this situation. However, once public, shareholders will want to know why Bitmain is continuing to divert profits to propping up a failed currency and how they intend to liquidate their massive position in BCash.
12/ The increased scrutiny from public markets and pressure from new shareholders is going to be the last straw.

Bitmain will be forced to abandon its efforts to prop up BCash and focus on the reality of the market:
13/ The most value will accrue to the currency that can show itself immutable and free of control. A currency controlled by one miner can never satisfy this property. Ultimately the only digital currency that has a hope of maintaining these core properties is Bitcoin (BTC).
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