SHANGHAI / HONG KONG (Reuters) – Bitcoin mania has sparked a wave of fundraising by Chinese companies looking to expand their cryptocurrency business or move into the red-hot sector.
From large listed companies tapping public markets to smaller players raising funds from venture capitalists, a jump in cryptocurrency prices and signs of increasing adoption of the technology by mainstream institutions have fueled the market boom.
Chinese bitcoin mining machine manufacturer Ebang International Holdings, which debuted on Nasdaq in June, ran two rounds of fundraising in February alone, bringing in $ 170 million even after an earlier offering in November.
Newcomer Code Chain New Continent Ltd, a Chinese waste recycling company, raised $ 25 million through a stock placement in February to fund a foray into bitcoin mining.
In private markets, “the competition is white-hot and filled with sharp elbows,” said Jehan Chu, managing partner at Hong Kong-based blockchain venture capital firm Kenetic Capital. “Every good quality funding round is oversubscribed within a week of being announced.”
The market thrived despite complicated official views on cryptocurrencies in China.
Cryptocurrency exchanges are banned and mining frowned upon, but there is strong official support for the development of blockchain technology, which supports cryptocurrencies such as bitcoin, but is also the key to new innovations in areas such as trade finance, supply chain management and anti-counterfeiting .
This has contributed to the emergence of attractive crypto projects in China, investors say, although many companies are still withdrawing and withdrawing money abroad.
Ebang plans to use its new capital to expand into cryptocurrency mining itself, open cryptocurrency exchanges in Singapore and Canada, and launch a Robinhood-like platform for bitcoin trading.
“Ebang’s growth story is very attractive to institutional investors … fundraising by all industry players is getting busier thanks to the bitcoin bull,” said Guo Yi, COO at Univest Securities, who underwrote the deals and helped raise funds. for several other Chinese crypto players.
Canaan Inc, another Nasdaq-listed Chinese maker of bitcoin mining machines, is also expanding into mining, where powerful computers are used to verify bitcoin transactions and compete for a bitcoin reward.
Bitcoin, the world’s largest cryptocurrency, has appreciated more than 300% since the fourth quarter of last year.
“Bitcoin prices provide us with a unique opportunity to set up mining operations,” said David Feng, co-CEO of newcomer Code Chain, which has ordered 10,000 bitcoin mining machines.
“EUPHORIAN ATMOSPHERE”
The Chinese rush comes when Coinbase, the largest US cryptocurrency exchange, filed for a Nasdaq listing last month. Regulatory approval would be a milestone for cryptocurrency advocates seeking mainstream approval.
“Anyone can feel this euphoric atmosphere in the market, and Coinbase’s listing would further elevate the mood,” said Jiang Changhao, co-founder and chief technology officer of Beijing-based Cobo, a crypto custodian and wallet service provider.
Cobo plans to launch another round of venture capital financing this month to fund international expansion, with the goal of tens of millions of dollars because, Jiang said, “the market is optimistic and our business is growing very, very fast.”
Kenetic Capital’s Chu said official support for blockchain, and the use of the technology in major initiatives from giants like Ping An and Ant Financial, were a factor in the number of high-quality blockchain and crypto projects in China.
But the recent price hike had “doused” napalm on industry competition, he said.
Still, the entry of some Chinese companies into the crypto space has raised the eyebrows of investors.
Last month, short sellers Hindenburg Research and Culper Research had claimed that Chinese blockchain firm SOS Ltd had made false claims about its cryptocurrency activities, the allegations SOS said were “biased, misleading and unsubstantiated”.
Univest Securities’ Guo said the market has zero tolerance for cheating, but there’s nothing inappropriate about Chinese companies jumping on the bitcoin cart.
“If people don’t point to (Tesla founder) Elon Musk for endorsing bitcoin, what’s wrong with Chinese companies embracing it?”
Reporting by Samuel Shen and Alun John; edited by Richard Pullin