Cryptocurrencies are disruptors in the modern financial landscape, with Bitcoin at the forefront.
Bitcoin’s phenomenal rise has commanded the attention of investors and techies alike. The technology has sparked the creation of companies looking to cash in.
One of them is the Bitcoin Group.
However, the lack of oversight and regulations of digital currencies had governments worldwide on the edge of their seats. Undeterred, Bitcoin Group entered public trading through an initial public offering (IPO) in 2016.
This article provides valuable insights into the significance of the Bitcoin Group IPO. We’ll also shed light on the potential benefits and risks of investing in crypto mining.
The Bitcoin Group: A Quick Overview
Bitcoin Group is a Melbourne-based Bitcoin mining operator. They operate 6,000 powerful computers across seven locations with cheap electricity costs, like China and Thailand.
For a time, Bitcoin Group also managed an arbitrage fund. Arbitrage involves taking advantage of price discrepancies of an asset in various markets.
The company would buy bitcoins at a bargain price on one exchange and flip them for a higher price on another.
How Does Bitcoin Mining Work
Bitcoin mining is the process of creating new bitcoins and ensuring people can safely transact on the network. The blockchain serves as a ledger that records all verified transactions in chronological order.
Bitcoin transactions are grouped into blocks. Using powerful computers, miners solve complex mathematical problems associated with the block.
They guess a random number (nonce) that, when combined with the block’s data, produces a specific hash value.
By September 2015, Bitcoin Group had generated 6.2 peta hashes through its mining operations. This figure accounted for roughly 15% of the Global Hash Power.
Rewards of Bitcoin Mining
Bitcoin mining sounds like tedious work, but what’s in it for miners?
First, miners earn newly minted bitcoins by dedicating resources and adding blocks to the chain.
Second, they receive transaction fees paid by users for including transactions on the block they mine.
Of course, transactions with higher fees get top priority.
Bitcoin Group IPO
Bitcoin Group is the country’s first cryptocurrency company floated on the ASX.
Here’s a quick overview of the Bitcoin Group IPO:
- IPO Date: January 2016
- Share Price: $0.2
- Target: AU$20 million
- Capital Raised: AU$5.9 million
Bitcoin Group owner Sam Lee secured funding from Chinese investor Allan Gao. Gao covered the lion’s share of the company’s pre-IPO expenses, including legal, underwriting, and listing fees.
DigitalBTC, another crypto company, had taken the backdoor to the ASX before. Meanwhile, Bitcoin Group wanted to start on a clean slate and without the excess baggage of a reverse takeover.
The IPO intended to devote AU$18 million to the purchase of new mining chips and equipment. The upgrade would drum up their computing powers and help them transform the company into a payment network.
Unfortunately, Bitcoin Group fell short of its investment goal and only raised 30% of its target.
Bitcoin Group IPO ASX: Early Challenges
While the Bitcoin Group IPO was groundbreaking, it had its fair share of challenges.
The plan to list on the ASX coincided with a senate inquiry into Bitcoin’s regulation. The Australian government called for the development of a framework to govern cryptocurrencies.
Despite opposition to the taxation ruling on cryptocurrencies, Bitcoin Group made a submission to the Senate Committee.
Pre-Prospectus Advertising Violation
The Australian Securities and Investments Commission (ASICS) issued a stop order, putting the brakes on their IPO plans.
The ban came after Bitcoin Group posted on WeChat, a Chinese social media platform, to gauge public interest in its IPO. ASIC saw this as a violation of advertising and disclosure requirements.
Without access to all the information in a prospectus, any statement about potential offers could unfairly influence an investor’s decision.
Bitcoin Group again rescheduled the IPO following a cross-reference error on their prospectus.
They issued a supplementary document with the corrections. They also added an explainer on IPO investment coordinated with BnkToTheFuture Ltd and a notice on a potential IPO investor.
The Bitcoin industry was wild and risky for investors. At one point, Bitcoin’s price was all over the place, jumping from US$1 to well over US$1,000 within just two years.
Then, in 2014, Bitcoin Group faced a significant setback when it fell victim to a hacking incident. The company lost 100 bitcoins, which amounted to AU$ 70,000 at the time.
This incident highlighted the need for cryptocurrency security.
The country has since upped efforts to make cryptocurrency safer for consumers. For instance, the National Anti-Scams Centre will work to prevent scams through real-time data sharing.
Earlier, ASIC released a guide on how to spot a crypto scam.
Goods and Services Tax on Cryptocurrency
The Australian Taxation Office refused to classify Bitcoin as a currency amid calls from the industry. Instead, Bitcoin fell under intangible assets, which resulted in two implications.
Like other taxable transactions, businesses accepting Bitcoin as a form of payment must pay goods and services tax or GST.
Similarly, customers who use Bitcoin for transactions were also liable to pay GST on the Australian value of the transaction.
However, everything took a turn on July 1, 2017.
Since then, cryptocurrencies used as payment have been GST-free, except for businesses profiting from them.
That said, Bitcoin and related digital assets are still not considered fiat currency—or legal tender.
Bitcoin Group ASX Collapse
In March 2016, Bitcoin Group backed out of its offer because of insufficient cash flow. Consequently, they had to refund the whole $5.9 million to subscribers.
The company blamed the failure of a third-party report to consider the impact of block-halving on Bitcoin prices.
Later, the company rebranded as Blockchain Global and refocused on financial consulting.
Because of these developments, there are no reports on the Bitcoin Group valuation.
The Bitcoin Group IPO is a clear example of the dynamic and ever-changing nature of the cryptocurrency industry.
This niche market presents mainstream investment opportunities. However, digital currencies are volatile and highly speculative compared to traditional assets.
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The information in this article is well-researched and factual. Still, it contains opinions also, and IT IS NOT FINANCIAL ADVICE and should not be interpreted as such, do not make any financial decisions based on the information in this article; we are not financial advisors. We are journalists. You should always consult with a professional before making any investment decisions. We hold no stock or interests in any of the Companies discussed on this website/app.