Chinese Chip Maker With a Hand in Crypto Mining Plans $2.8B IPO

The exchange has accepted SMIC’s application, according to a document filed Monday with the Hong Kong Stock Exchange (HKEX), where it is already listed. The company said part of the proceeds will be focused on developing 14nm chips, which will be used for crypto mining.

The move comes just two months after the company announced a partnership with crypto miner maker Canaan Creative. The two companies plan to develop a mining machine for an undisclosed cryptocurrency with a relatively small market cap, rather than bitcoin due to current technical limitations.

SMIC’s chip-making capabilities still lag behind Bitmain’s major chip supplier, Taiwan Semiconductor Manufacturing Company (TSMC), as well as Samsung, which works closely with Whatsminer and MicroBT. For example, Samsung has announced its intention to mass-produce 8nm chips in the first quarter, while TSMC is developing 5nm chips.

Founded in mainland China in 2000, SMIC could be one of China’s best hopes to advance its chip-making technologies and become less dependent on manufacturers that have deeper connections with the U.S. government amid increasing tension between the two countries.

Strong support from the Chinese government can put SMIC on the fast track to catch up with its competitors. The company has received substantial financial windfalls since the U.S. put forward new restrictions that could limit chip-makers such as TSMC and Samsung from manufacturing chips for Chinese tech conglomerate Huawei.

The Sci-Tech Innovation Board of the SSE, where SMIC wants to go public, went live last June in Shanghai. The new market is touted to be part of China’s capital market reform and support technology companies that are in line with national strategies.

SMIC also received a $2.2 billion investment in May from National Integrated Circuit Industry Investment Fund II and Shanghai Integrated Circuit Industry Investment Fund II, which are two of the largest national investment funds.

The government fund came as the U.S. Department of Commerce expanded a restriction known as the Foreign Direct Product Rule to make it harder for China to import chips from Samsung and TSMC. It also cut off chip supply to Huawei in May, while setting up a new plant in the U.S.

Bitcoin (BTC) was changing hands around $9,575 as of 20:00 UTC (4 p.m. EDT), gaining less than a percent over the previous 24 hours. Despite a small rally of around $250 on Sunday, the world’s largest cryptocurrency by market capitalization still spent much of the weekend in the mid-$9,000s.

“We are still waiting on a breakout above $10,055 as a positive catalyst,” said Katie Stockton, an analyst at Fairfield Strategies. Stockton sees signs of price appreciation in the near-term. “There is an upturn in one of my preferred gauges that suggests this week will have a bullish bias within the framework of neutral short-term momentum and positive intermediate-term momentum.”

The wait-and-see approach for traders to get over $10,000 bitcoin hump continues. In the meantime, traders have pointed to increased excitement in the oil markets over the past two months.

Jose Llisterri, co-founder of cryptocurrency derivatives exchange Interdax, says geopolitical tensions, combined with economic issues related to the coronavirus pandemic, have created a truly unique situation for crude. Oil is climbing 1% with a barrel of crude at $35 as of press time.

The Russia-Saudi Arabia price war, combined with the COVID-19 pandemic, have immensely impacted oil’s roller coaster, ride Llisterri told CoinDesk. “All these events are still playing out, so unless they are fully resolved markets should expect sudden swings in prices. These events have attracted many crypto traders who are lured into volatile markets.”

While bitcoin has gyrated from as high as $10,081 to as low at $3,866 since March, oil’s price has been more rocky. In fact, oil has been much more volatile than bitcoin since April, with the spot price for crude as high as $48.56 and as low as $0.04 since March.

David Russell, vice president of market intelligence at TradeStation Group, a brokerage firm, says bitcoin’s fundamental aspects are very distinct from the crude markets. “Bitcoin couldn’t be more different than oil. It has limited supply, which just got even smaller because of halving. Crypto markets also had their last big volatility storm in 2018 and have been getting calmer since.”

Indeed, in 2020, the bitcoin rollercoaster has had nothing on oil.

The high volatility of production, demand and supply is weighing on crude markets, affecting its price tremendously, Russell noted to CoinDesk. “One has finite supply (bitcoin), while the other has a long history of gluts and overproduction (oil).”

Other markets

Digital assets on CoinDesk’s big board are mixed on Monday. The second largest cryptocurrency by market capitalization, ether (ETH), gained less than a percent in 24 hours as of 20:00 UTC (4:00 p.m. EDT).

Cryptocurrency winners on the day include neo (NEO) up 7.5%, qtum (QTUM) in the green 3.2% and decred (DCR) up 2%. Losers on the day include ethereum classic (ETC) in the red 3%, tron (TRX) down 2.6% and monero (XMR) slipping 2.4%. All price changes were as of 20:00 UTC (4:00 p.m. EDT) Monday.

Gold is in the green on the day, with the yellow metal gaining less than a percent and closing at $1,740 at the end of New York trading.

In the United States, the S&P 500 index was up less than a percent. U.S. Treasury bonds were mixed on the day. Yields, which move in the opposite direction as price, were down most on the 2-year, in the red 3.6%

In Europe, the FTSE Eurotop 100 index of the largest stocks by market capitalization ended up 1%. In Japan, the Nikkei 225 index was in the green 1%.