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In a flip flop scenario, the China-based crypto mining hardware manufacturer Canaan Creative has suffered a sharp decline in its stock price amid a consistent wave of pressure on the price of Bitcoin.
On November 21, the first day the company began being traded on the NASDAQ, Canaan’s stock was priced at almost $9; however, the stock’s closing price on December was at around $5.24. Hence, in only a few weeks span, the price of the Canaan’s’s share crashed by over 40%. This deep fall was synchronous with a massive drop in the trading volume of Canaan’s stock (from $4 million on the first day to less than $200,000 a few days ago).
Bitcoin mining hardware manufacturers such as Canaan rely heavily on the price of Bitcoin and of other cryptocurrencies. Unfortunately, the broader cryptocurrency market came back under downside pressure on Tuesday, as Bitcoin and other major cryptocurrencies gave back the early week’s trading gains. With a burgeoning debate about central bank issued cryptocurrencies, things are appearing to be shaky for the cryptocurrency market which has a current market capitalization of more than $200 billion.
Experts predict that if the current trends persist, Canaan can end up losing its market position as one of the leading digital currency mining hardware manufacturers. For crypto enthusiasts, this prediction should come with no surprise considering how demand and supply of digital currencies impact the sales and profits (and eventually stock market valuation) of mining hardware manufacturers. This crypto-related demand-and-supply is to be seriously disrupted if governments authorize launches of central bank issued national digital currencies.
Strong Competition in the Crypto Mining Arena
Despite Canaan’s heavy reliance on Bitcoin trends, the sharp decline in its stock price cannot be attribute strictly to turbulence in the Bitcoin world. An aggressive marketing and expansionist campaign on part of its competitors is taking a toll on the Canaan and its stock market position.
For instance, Bitmain’s CEO Jihan Wu promises to implement an expansionist policy which will see Bitmain entering North and South American markets. Additionally, a new mining gig lineup has attracted many customers. Bitmain’s sales projections for the last quarter of 2020 look to be promising as many customers have ordered the company’s new crypto mining hardware before their official release.
Similar advancements coming from the competitors have dimmed the light on Canaan. Almost a month ago, Canaan has announced it is going to be a publicly traded company on the NASDAQ. It set itself a target of gathering $400 million in the first phase of its initial public offering (IPO). Since then, the trajectory of the stock price has declines sharply.