Canaan Technology surged more than 80% to close at $8.04

Source: Xiaocong Blockchain, original title: Canaan Technology surged more than 80%, but revenue performance may not meet expectations due to delivery delays

This Wednesday, the share price of Canaan Inc., the first mining machine stock, soared by more than 80%.

At the end of the trading day, Canaan Technology closed at $8.04 per share, up 82.73%. The opening price was $4.42 per share and once rose to $8.69.

In terms of trading volume, more than 11 million shares have changed hands so far, compared with the previous average trading volume of 250,000 shares.

Since Canaan Inc. went public on the Nasdaq in November 2019, its stock price has performed poorly.

Before Wednesday, CAN had fallen 50% since its IPO and hit an all-time low of $4.31.

However, an earlier article by The Block research analyst Matthew Yamamoto pointed out that Canaan’s stock may not perform as expected given that market signals seem to be bullish on mining machine manufacturers. At the same time, there are concerns that its stock price increase may not be justified by revenue performance.

As miners anticipate the mining reward to be cut in half in May, many are recycling old mining equipment, creating high demand for equipment with higher hash rates and greater energy efficiency from manufacturers such as Canaan, Bitmain, and MicroBT.

Recently, with the rise of Bitcoin, more miners have expanded their operations by purchasing newer mining machines.

Matthew Yamamoto also pointed out that the price of mining equipment will vary with the movement of Bitcoin price. As the price of Bitcoin rises, this should be a bullish sign for Canaan because their mining machines will be sold at a higher price.

Meanwhile, publicly traded miners such as Hut 8, Bitfarms, and Argo Blockchain have also seen a significant increase in market share since the beginning of 2020, up 76%, 90%, and 28%, respectively.

Canaan's stock price surge may not be justified by first quarter revenue performance

However, other market participants have a more volatile view on Canaan’s stock surge, arguing that the coronavirus outbreak in China has affected the ecosystem of most Chinese mining hardware manufacturers, causing delays in their production and shipping plans.

Furthermore, given that Canaan is listed on the Nasdaq, the company cannot record its revenue until the mining machines are delivered, which means that delivery delays will result in a decrease in its recorded quarterly revenue.

Matt D'Souza, CEO of Blockware Solution, said that there is still more than a month and a half to the end of this quarter, but if the company does not ship these products out of the market by March 31, it will not be able to record deposits as revenue according to US GAAP (Generally Accepted Accounting Principles). Therefore, he is worried that the rise in stock prices may not be justified by revenue performance.

The epidemic has affected mining machine manufacturers and delayed production and shipments

Yesterday, CoinDesk article stated that the slowdown in the growth of Bitcoin mining difficulty indicates that miners have to suspend upgrading equipment after the COVID-19 outbreak prompted Chinese authorities to implement quarantine and major mining equipment manufacturers postponed production and shipments. Data shows that the mining difficulty was adjusted to 15.55 T on February 11, up 0.52% from January 28. This is a significant decline compared to the growth rates on January 28 (4.67%) and January 15 (7.08%). In May this year, Bitcoin will usher in its third halving, which may cause miners' operating costs to exceed their income.

Regarding the impact of the emerging coronavirus outbreak on the crypto industry, Bloomberg reported that the novel coronavirus outbreak has begun to affect the cryptocurrency industry. Events such as the NiTROn2020 conference in Seoul, Blockchain Week 2020 in Hong Kong, and Token2049 have all been postponed; cryptocurrency lending startup DeFiner has canceled a ten-city tour investment project; a mining farm of BTC.top has been closed; mining machine manufacturers such as MicroBT are also delaying shipments. Dave Balter, CEO of research firm Flipside Crypto, said: "Unfortunately, events like the novel coronavirus will be more 'common' than 'black swan events' in the next few decades. Specific industries will be affected, but this will become part of the new normal."

In addition, in response to the question of "whether the BTC reward halving will lead to mining accidents", F2Pool's official reply said that historically, Bitcoin halving has proven to be an important catalyst for pushing Bitcoin into a new bull market. The second Bitcoin halving took place in early July 2016. Bitcoin rebounded from more than $200 in 2015 to $960 (at the end of 2016) in more than a year. It continued to rise and reached a record high of $20,000. In fact, the halving itself is to reduce inflation, but for miners, halving is a double-edged sword. The halving in May coincides with the replacement of old and new mining machines, and 16nm mining machines are facing shutdown. At present, the entire Bitcoin network has about 110E computing power, of which about 40% are mining machines from the S9 era. With the end of the first flood season after the halving, this batch of mining machines will basically enter its final stage. Miners need to make arrangements in advance and control their own risks. For now, miners can pay more attention to the price and payback period of the new generation of high-computing power mining machines and make arrangements in advance. This year is the time to replace old mining machines with new ones, but attention should be paid to investment risks.

Xiaocong previously quoted Lieyun Finance as saying that Fan Xiaojun, sales director of Bitmain, said in an interview that due to the impact of the epidemic, the delivery of major mining machine manufacturers may be delayed. Now most of the staff cannot return to work on time, and there will be certain delays in the delivery of chips, supply chains, and materials. In this case, the following situations should occur: 1. The number of newly produced mining machines will decrease (Bitmain's current 17-model mining machines have been sold until the end of March, and the total amount is not large); 2. The growth of the computing power of the entire network will become very slow; 3. The value of the existing mining machines in the market will increase; 4. If the difficulty, currency price, and electricity cost remain constant, the total computing power of the high-J/T machines may decrease after halving.

When asked about the impact of the coronavirus on the project development caused by the delay in shipments of ASIC mining machine manufacturers, Wang Xin, co-founder of the Litecoin Foundation, said that if everyone delays the shipment of ASICs, the computing power should not be greatly affected for the time being. However, once the epidemic is over, there may be a period of rapid increase in computing power. But because all miners are on an equal footing, everyone will suffer a little loss together. If only some ASICs are delayed and some ASICs continue to be shipped, the computing power will still increase, and it may put greater pressure on miners who cannot get new machines. In either case, it will have a greater impact on the cash flow of mining machine manufacturers. I hope they can have enough cash to keep the company running normally.

This article is partially translated from https://www.theblockcrypto.com/post/55721/nasdaq-bitcoin-hardware-canaan-price-stock-surge