According to Jihan Wu, cryptocurrencies were designed to be volatile, but their long-term growth will far outweigh their price fluctuations. “Even if 95% of today’s coins lose all of their value and disappear,” he claims, “the remaining 5% will grow massively.”
Wu’s optimism stems from his own personal experience. More than a decade ago, he discovered bitcoin and saw its early promise when he saw it being used to buy computer hardware and IT services in online forums like Bitcointalk.org. Bitcoin, on the other hand, would require far more infrastructure to break out of its niche market and gain wider acceptance. As a result, Wu began developing a solution that would be critical to bitcoin’s growth.
In 2013, Wu co-founded Bitmain Technologies with Micree Ketuan Zhan, a supplier of specialized hardware known as mining rigs, which are designed for the sole purpose of adding transactions to bitcoin’s blockchain. By making their processing power available to the network, the owners of the hardware earn new bitcoins or mine new bitcoins.
Bitmain’s mining rigs became a runaway success as bitcoin’s price rose over time, making both Wu and Zhan billionaires. According to Frost & Sullivan, Bitmain had become the world’s largest supplier of cryptocurrency mining rigs by 2018, with a market share of 75%. And the Beijing-based firm was gearing up for a multibillion-dollar Hong Kong public offering—until bitcoin crashed, losing 70% of its value by the end of the year.
The IPO of Bitmain was a victim of bitcoin’s volatility, putting a strain on the company’s finances. And the two co-founders were thrown into a fight for survival that quickly turned into a battle for control of the company.
Today, Wu sees bitcoin’s ups and downs as stepping stones on his path to becoming one of the world’s largest crypto business conglomerates. Despite China’s recent crackdown on crypto mining and trading, Bitmain has returned to profitability, according to Wu, and continues to dominate the global market for mining rigs from its Beijing headquarters. The company halted shipments to mainland Chinese clients in response to the new restrictions, though overseas customers are said to be unaffected. Bitmain is also developing energy-efficient mining rigs in response to regulators’ concerns, but it did not elaborate on any additional measures it plans to take.
Wu left Bitmain at the start of the year to focus on his role as chairman of two Singapore-based spinoffs: Bitdeer Technologies, a cryptocurrency mining platform that has already announced plans to list on the Nasdaq at a $4 billion valuation, and Matrixport, a financial services firm that recently raised $1 billion in funding.
Wu’s long-term optimism for the crypto industry was demonstrated once again with the launch of Matrixport in February 2019. When he and his cofounder John Ge Yuesheng founded their company, Bitcoin was still in a bear market.
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“We believed that the combined value of crypto and blockchain would reach tens of trillions of dollars in the future,” Wu says.
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necessitating the development of advanced and sophisticated products to manage the wealth they amass in crypto assets.”
Their decision to press on now appears to be foresighted. According to CoinGecko data, the overall market cap of cryptocurrencies has risen to an all-time high of $3 trillion since Matrixport’s launch in November. According to a report from Crypto.com, the global market size of crypto users has more than doubled to 221 million people in the first half of the year.
Cryptocurrencies have been on a tear this year, buoyed by signs that digital assets are gaining traction. El Salvador was the first country in the world to recognize bitcoin as legal tender, and a growing number of businesses, including AMC, AT&T, Mastercard, Microsoft, and PayPal, are now accepting some cryptocurrencies as payment.
Matrixport raised $100 million in a Series C funding round led by Yuri Milner’s DST Global, Adrian Cheng’s C Ventures, and Kuok Meng Xiong’s K3 Ventures, with participation from Qiming Venture Partners and existing backers like IDG Capital and Dragonfly Capital.
According to Adam Goldberg, co-founder of Standard Crypto, a venture fund based in San Francisco, Wu’s track record of building multiple multibillion-dollar companies is nearly unrivaled. Goldberg, who was previously with Lightspeed Venture Partners, became a Bitmain investor in 2017 and later joined the Matrixport board of directors.
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“Jihan is a multi-generational business owner. He’s incredibly agile and resilient, and he’s always looking around corners for clues about the crypto industry’s future.”
Matrixport’s name alludes to the company’s goal of becoming a portal or gateway for investors to enter a new digital realm, similar to Wu’s favorite film The Matrix. The company’s strategy entails providing investment products similar to those found on Wall Street but tailored specifically for cryptocurrency investors.
Matrixport offers custody, trading, lending, and structured products as well as other services. According to Wu, they were the first to offer crypto dual currency products, which are investments that payout in one of two possible cryptocurrencies, depending on market prices at the time. According to the company, it now manages and custody $10 billion in assets and has average monthly trading volumes of more than $5 billion.
Wu’s other company, Bitdeer, is a mining platform that manages more than 100,000 mining units across five pools in the United States and Norway.
Bitdeer and Matrixport were both spun off from Bitmain as part of a settlement agreement between Wu and Zhan following a feud between the two co-founders. Wu is unable to discuss the terms of the deal in detail due to a nondisclosure agreement, but he was able to speak with Forbes Asia for the first time about the circumstances that led to it.
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“It was a difficult time for our company and for me.” “Of course, the pressures of running a complex manufacturing business mounted, eventually resulting in a rift between our two cofounders,” Wu recalls.
According to its prospectus filed with the Hong Kong stock exchange, Bitmain had quickly gone from generating $2.5 billion in revenue in 2017 and a profit of $742 million in the first half of 2018, to losing money and laying off swaths of employees.
During the boom, the company dabbled in a variety of areas—AI, mining pool construction, a decentralized crypto exchange, venture capital, and so on—but many of those ventures failed to turn a profit during the bear market of 2018, dubbed “crypto winter” for its deep selloff followed by a long period of flat trading.
Bitmain’s two co-founders, who had previously worked together as co-CEOs, had a power struggle over the company’s strategic direction. The feud became public at times until a deal was reached at the end of last year, with Wu stepping down as chairman and CEO of Bitmain but keeping a stake in the company. Zhan is now in charge of Bitmain’s manufacturing as well as Antpool, a new mining pool.
“The settlement agreement brings the hardship to a close. “Bitmain did not go bankrupt; in fact, it is now doing extremely well,” Wu says. “Bitmain’s total net profit is expected to be in the range of $2 billion to $4 billion.” It’s a business that makes a lot of money.”
When Wu was working as an investment analyst in Beijing, he came across bitcoin and decided to start a business with it. He was immediately engrossed by Satoshi Nakamoto’s idea for a decentralized digital currency, having studied economics and psychology at Peking University.
“He [Nakamoto] published a white paper in 2008 that opened up a new world and allowed new players like us to participate.”
Wu said he immediately stopped studying to become a certified accountant in order to focus on learning about bitcoin and then investing in it. Wu invested in ASICMiner, a bitcoin mining company founded in 2012 by Jiang Xinyu, or Friedcat as he was known in various online forums, after purchasing hundreds of coins himself in 2011. Wu used the profits from that deal, along with money from a group of other investors, to form Bitmain, which he co-founded with Zhan in 2013.
Prior to teaming up with Wu, Zhan was a chip designer who ran his own business making set-top boxes for televisions. Bitmain was founded by the two as one of the first manufacturers of application-specific integrated circuits, or ASICs, which are used to mine cryptocurrencies.
Wu’s initial goal was to be a VC investor in Bitmain, but after investing his money, he quickly realized that the high demands of running a tech startup required him to get involved in the company’s management.
Bitmain has risen to become the most powerful company in the bitcoin economy in less than four years. Bitmain’s vertical integration included everything from designing the chips for its mining rigs to assembling and selling the hardware to customers all over the world. Bitmain was also running mining pools for customers on a contract basis, as well as owning a few of its own. By 2018, Bitmain’s pools had contributed about 37% of the Bitcoin network’s total processing power.
Despite the regulatory uncertainty surrounding cryptocurrencies in many of the world’s largest markets, Wu believes the industry will continue to develop unique innovations because it is not bound by the traditional financial system’s constraints.
“Decentralized finance [DeFi] is a breath of fresh air,” he says. “Technologies such as crypto and blockchain have ushered in a new era, allowing fintech entrepreneurs to achieve significant success.” Blockchain technology will eventually be accepted by traditional financial institutions and regulators.”
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