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Crypto Biz: UAE’s regulatory structure draws crypto firms, Canaan’s revenue slumps, and more

December 3, 2023 Coin Telegraph

Canaan

The United Arab Emirates increasingly attracts Web3 companies to its jurisdictions, becoming the center of global crypto innovation.

Behind the wave of companies moving or deploying initiatives in the UAE is regulation. The country has introduced regulatory frameworks for decentralized autonomous organizations (DAOs), virtual asset providers, metaverses and other Web3-related entities.

By offering regulatory clarity and a clear path to compliance — amid a crackdown in the United States — the UAE is moving closer to fulfilling what it wants to be: an international financial hub for digital assets.

While predictions about how it will affect the future of the UAE or the crypto space itself vary, history shows how countries have used regulatory gaps to build new industries or curb existing ones.

This week’s Crypto Biz also explores Canaan’s revenue challenges, Wormhole’s massive fundraising and Banco Santander’s crypto moves.

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Open-source blockchain developer Iota announced the launch of the Iota Ecosystem DLT Foundation in Abu Dhabi, which is dedicated to expanding its distributed ledger technology (DLT) in the Middle East.

Canaan secures new financing as revenue falls 55% in Q3

November 28, 2023 Coin Telegraph

Canaan

Despite a downturn in its bottom line, the company has secured a deal with an institutional investor to potentially raise $125 million in capital.

Bitcoin (BTC) miner Canaan is seeking new capital amid a slump in its revenue and bottom line.

According to its Q3 2023 earnings report released on Nov. 28, the company seeks to sell $148 million in equity through an at-the-market offering. The day before, Canaan announced that it had reached an agreement with an undisclosed institutional investor to issue up to 125,000 preferred stock at $1,000 apiece for total proceeds of $125 million.

Compared to the third quarter of 2022, the company’s revenue fell 55% to $33.3 million due to a decrease in the amount of Bitcoin (BTC) mined and a fall in the number of ASIC mining rigs sold. The firm also swung to a net loss of $110.7 million compared to a net income of $6.3 million in the same period a year ago.

“Overall, we faced increased pricing competition and a noticeable softening in purchasing power on the demand front, which has posed severe challenges to our sales,” said Nangeng Zhang, chairman and CEO of Canaan. The firm expects its Q4 revenue to be roughly unchanged from Q3 due to “challenging market conditions across the industry.”

Due to soaring electricity costs and lower BTC prices, several Bitcoin miners filed for bankruptcy in 2022, disrupting the sales of Bitcoin ASIC mining rigs. However, market conditions have improved this year due to easing inflation and a recovery in Bitcoin prices. On Nov. 13, Bitcoin miners earned $44 million in block rewards and transaction fees, the highest ever in history.

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Bitcoin to hit $100K in 2024? Canaan VP weighs up 2024 halving opportunities

September 12, 2023 Coin Telegraph

Bitcoin

Canaan vice president Davis Hui believes a supply deficit following the next Bitcoin halving will drive its price past $100,000.

Executives from prominent mining and manufacturing firms believe market forces resulting from the fourth Bitcoin halving scheduled in 2024 could force the price of Bitcoin (BTC) past $100,000.

Magazine editor Andrew Fenton spoke to Canaan vice president Davis Hui following a panel discussion at Canaan’s Avalon Bitcoin and Crypto Day (ABCD) in Singapore.

Hui and a panel that included Bitcoin mining ecosystem executives from Singapore, Kazakhstan and the United Arab Emirates all offered BTC price predictions around $100,000 in 2024 resulting from the effects of the latest Bitcoin mining reward halving.

Hui told Cointelegraph that the supply of Bitcoin would be drastically reduced with the reward halving down to 6.25 BTC per block, while traditional finance institutions are showing increased interest in investing in the sector:

“What about BlackRock? They’re holding onto $10 trillion of assets under management. The overall cryptocurrency market cap is $2 trillion — they have five times more than that.”

The Canaan VP said his prediction was heavily influenced by the outcome of a number of Bitcoin exchange-traded fund applications lodged with the United States Securities and Exchange Commission by some of the world’s largest asset managers.

“This money will come in, the BTC demand will increase, while the supply has decreased, and the price will increase.”

Hui also noted that it had become difficult for most miners to continue operating in highly competitive market conditions, with all-time hash rates and network difficulties directly eating into miner profitability.

Those who could not cover electricity costs with the Bitcoin mining rewards earned will simply shut off those machines, while those who continue operating will do so with a view of the potential upside ahead of the 2024 halving, he said.

Miners who can upgrade to more efficient and powerful machines are able to maintain better profitability, he said. Hui predicts that mining companies in the U.S. might be particularly hard pressed, given high electricity and administrative costs.

Hui also conceded that Canaan was among the industry companies to have reported a financial loss in the first quarter of 2023, highlighting the impact of a prolonged cryptocurrency bear market.

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Canaan’s 2Q mining revenue jumps 43% on 1Q, but net loss climbs 31%

August 29, 2023 Coin Telegraph

Bitcoin

Bitcoin mining firm Canaan posts second quarter financials, with Bitcoin mining revenue up 43% from Q1 2023, though net loss also rose 31% to $110 million.

Bitcoin mining company Canaan announced its unaudited financial results for Q2 2023, showing growth in computing power sold and BTC mining revenues while it tackled a significant net loss of $110 million. up 31% on Q1.

The NASDAQ-listed company outlined a variety of reasons influencing increased revenues and a significant headwind that included an inventory write-down and equipment impairment totaling $54 million.

Canaan recorded $73.9 million in revenue in Q2 2023, up from $55.2 million quarter-on-quarter. This consisted of $57.9 million from products revenue and $15.9 million in Bitcoin mining revenue.

BTC mining revenues reflected 43.3% growth compared to Q1’s $11.1 million, with Canaan’s 2023 Q2 more than doubling Q2 2022's $7.8 million in BTC mining revenues. The company attributed this surge to the recovery in Bitcoin prices and the consequent rise in Bitcoin rewards.

“The sequential increase was mainly driven by the Bitcoin price recovery and increased Bitcoin rewards across the network during the quarter.”

Canaan also reported significant growth in its total computing power sold, reaching 6.1 million Thash/s, up 45% quarter-on-quarter, with the sector becoming a major driver of revenue for the company.

Canaan also detailed net losses totalling $110.7 million in Q2, which it attributed to non-cash accruals and provisions reflecting changes in selling prices, regulatory shifts, and partner agreements.

Canaan CFO James Jin Cheng added that the losses included inventory write-down, provision for commitment reserve and impairment of property and equipment which totaled US$54.7 million.

“These non-cash accruals and provisions reflect our consideration of the latest selling price change, regulation changes in Kazakhstan, and the default by the partner at a U.S. project, which did not influence our cash flow.”

As of June 2023, Canaan’s listed cryptocurrency holdings included 1,125 BTC valued at US$28.8 million. 747 BTC are owned by Canaan, while 378 BTC are attributed to customer deposits.

Canaan also reported that it had suspended 2.0 exahash/s of its mining computing power based in Kazakhstan to ensure legal compliance with the Rules for Licensing of Digital Mining Activities coming into effect.

The company is in the process of obtaining a specialized license to continue its operations and expects a reduction in its Q3 BTC generation as a result of the offline hardware.

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Bitcoin miner Canaan’s net loss slightly improved in Q1 amid market turbulence

May 26, 2023 Coin Telegraph

Bitcoin mining

Diluted net loss per American depositary share in Q1 2023 stood at $0.51, down from $0.55 in the previous quarter.

Chinese Bitcoin mining company Canaan reported slight improvements in some of its financial metrics in the first quarter of 2023. The progress, however, is still far behind where it was last year in this period.

According to an unaudited report posted on its investor relations page, Canaan’s net loss was $84.4 million in Q1, lower than its $91.6 million net loss in the previous quarter. The net loss represents a major reversal compared to the same period in 2022, when the firm reported a net income of $65.1 million.

Diluted net loss per American depositary share (ADS) in the first quarter of 2023 was $0.51, down from $0.55 in the previous quarter, while diluted net earnings per ADS in the same period of 2022 stood at $0.38. According to Investopedia, an ADS is an equity share in a non-U.S. company held by a United States depositary bank and available for purchase by investors.

The company claims to be expanding operations despite the ongoing bear market and associated drop in earnings.

The quarterly results were impacted by several factors, including low market demand that hindered product revenue, the ongoing crisis in the banking system and the slow recovery of Bitcoin’s (BTC) price. Revenue in Q1 totaled $55.1 million, against $58.3 million last quarter and $201.8 million in the same period of 2022.

“In the first quarter of 2023, we experienced a further contraction in our sales revenue, due to the industry-wide reduction in selling prices, and unforeseen delays in payment and shipment following a series of U.S. bank failures. In addition, our mining business encountered difficulties that postponed the increase of our installed hash rates," said Canaan’s chief financial officer James Cheng in the report, claiming the revenue results “fell short” of expectations.

A revenue breakdown shows $44.1 million coming from products revenue and $11.1 million from mining activities, as well as $300,000 in other revenues. Income generated from mining activities rose 3.3% from $10.7 million in the fourth quarter of 2022 and represents a 130.2% increase from $4.8 million during the same period of 2022.

Costs linked to mining operations include electricity and hosting, as well as equipment depreciation and amortization.

The total operating expenses in the first quarter of 2023 were $38.1 million, compared to $60.8 million in the fourth quarter of 2022 and nearly equal to the same period last year, when it stood at $38 million. “We managed to narrow our operating loss by 31.4% from the last quarter," noted Cheng.

The report shows a decrease in investment in research and development. Canaan spent $19.1 million in the first quarter, compared to $33.4 million in the previous period. The decline was due to one-off expenditures of $14.3 million for research and development for the A13 series products. In the same period of 2022, the company committed $15.1 million in R&D.

Cryptocurrency assets held by Canaan as of March 31, 2023 totaled 623 BTC, worth $13.4 million, according to the report. Cash and cash equivalents were at $72 million, compared to $101.6 million as of Dec. 31, 2022.

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Canaan

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