Dialogue with Wu Jihan: Keep a long-term perspective, the value growth of Crypto far exceeds its price fluctuations

Source: Forbes

Compiled by: Rhythm

Recently, Wu Jihan, chairman of Bitdeer Group and co-founder of Bitmain and Matrixport, was interviewed by Forbes. Since the equity dispute with another co-founder of Bitmain, Jihan has rarely appeared in public, often acting as a behind-the-scenes guide for Bitdeer Group. In this interview, he expressed his optimism and faith in Crypto and blockchain. Wu firmly believes that the sector will rapidly grow to a scale of tens of trillions of dollars in the future.

Below is the translation of the interview content:

Wu Jihan stated that Crypto is inherently volatile, but in the long run, its growth will far exceed its price fluctuations. "Even if 95% of tokens lose all their value and disappear today, the remaining 5% will grow significantly," he said.

Wu's optimism stems from his experiences. More than a decade ago, when he saw Bitcoin being used to purchase computer hardware and IT services on online forums like Bitcointalk.org, he discovered Bitcoin and understood its early prospects. However, to break out of its niche market and gain broader recognition, Bitcoin needed more infrastructure to support it. Thus, Wu began researching a solution that would play an important role in Bitcoin's development.

In 2013, Wu Jihan collaborated with Jihan to launch Bitmain Technologies Ltd., a specialized hardware supplier known for mining equipment. Those who owned the mining machines could mine Bitcoin by providing processing power to the network.

As Bitcoin's price rose year after year, Bitmain's mining machines became a huge success, and both founders saw their fortunes soar, becoming billionaires. According to Frost & Sullivan, by 2018, Bitmain had become the world's largest supplier of Crypto mining equipment, with a market share as high as 75%. At that time, the Beijing-based company was preparing for a multi-billion dollar IPO in Hong Kong. However, what followed was a massive Bitcoin crash, with Bitcoin's value shrinking by 70% by the end of that year.

Bitmain's IPO became a casualty of Bitcoin's volatility, and the severe price fluctuations put heavy pressure on the company's finances. The two co-founders soon found themselves in a struggle for survival, which later evolved into a battle for control of the company.

Wu Jihan reflects on the tumultuous development of Bitcoin as a milestone in his entrepreneurial journey to build one of the largest crypto business empires in the world. Despite China's recent crackdown on crypto mining and trading activities, Bitmain has returned to profitability and continues to dominate the global mining equipment market. In response to new restrictions, Bitmain has stopped shipping to customers in mainland China, but overseas clients are reportedly unaffected.

Earlier this year, Wu Jihan left Bitmain to focus on serving as chairman of two Singapore-based companies, Bitdeer and Matrixport. Bitdeer recently announced plans to go public on Nasdaq, with a valuation of $4 billion; Matrixport, a financial services company, was valued at $1 billion in its latest funding round.

Matrixport was launched in February 2019, during a bear market in the crypto market, and his decision to start a business again proved his long-term optimism about the crypto industry. "We believe that Crypto and blockchain will rapidly grow to tens of trillions of dollars in the future," Wu said. "And many of these new users will stay in the crypto market forever, so they will need advanced and complex products to manage the wealth they accumulate in crypto assets."

The decisions they pushed forward now seem prescient. According to CoinGecko, since Matrixport's launch, the overall market capitalization of Crypto soared to a historic high of $3 trillion in November. A report from Crypto.com indicated that the global market size of Crypto users more than doubled in the first half of this year, reaching 221 million people.

With signs that digital assets are becoming increasingly mainstream, Crypto prices have been rising this year. El Salvador became the first country in the world to accept Bitcoin as legal tender, and more companies, including AMC, AT&T, Mastercard, Microsoft, and PayPal, now accept some cryptocurrencies as payment.

Encouraged by the rising tide of the Crypto market, Matrixport announced it raised $100 million in a Series C funding round in August, led by partners from Yuri Milner's DST Global, Adrian Cheng's C Ventures, and Kuok Meng Xiong's K3 Ventures, along with other participants including Qiming and existing supporters like IDG Capital and Dragonfly Capital.

Adam Goldberg, co-founder of the San Francisco-based venture fund Standard Crypto, said Wu Jihan's track record in building several billion-dollar companies is nearly unparalleled. Goldberg, who previously worked at Lightspeed Venture Partners, became an investor in Bitmain around 2017 and later joined the board of Matrixport.

The name Matrixport suggests its goal of becoming a gateway for investors entering the new digital realm, much like Wu Jihan's favorite movie, "The Matrix." The company's strategy involves offering investment products similar to those on Wall Street, but tailored specifically for Crypto investors.

Matrixport's services include custody, trading, lending, and structured products. Wu mentioned that they were the first to offer crypto dual-currency products, which provide guaranteed returns and settle in one of two possible cryptos based on the market price at the time. The company claims it now manages and custodies assets totaling $10 billion, with a monthly trading volume exceeding $5 billion.

Another joint venture that Wu Jihan built, Bitdeer, is a mining platform currently operating five mining pools in the U.S. and Norway, managing over 100,000 mining machines.

As part of the reconciliation agreement between Wu Jihan and Jihan, both Bitdeer and Matrixport were spun off from Bitmain. Due to confidentiality agreements, Wu Jihan cannot discuss the terms of the deal in detail. "That was a difficult time for our business and for me. Of course, the pressure of running a complex manufacturing business accumulated over time, ultimately leading to a fallout between the two co-founders," Wu Jihan said when reflecting on that experience.

According to a prospectus submitted to the Hong Kong Stock Exchange, Bitmain generated $2.5 billion in revenue in 2017 and achieved a profit of $742 million in the first half of 2018. However, good times were short-lived, as the company soon faced losses and laid off a large number of employees.

During the boom, Bitmain ventured into areas including AI, mining pool construction, decentralized trading platforms, and venture capital, but some ideas may have been ahead of their time, as many of these initiatives failed to turn a profit during the bear market of 2018.

The two co-founders of Bitmain had previously worked together as co-CEOs, but they had differences in the company's strategic direction, leading to a power struggle. The disputes were made public multiple times until the two sides finally reached an agreement at the end of last year, with Wu Jihan resigning as chairman and CEO of Bitmain, although he still holds shares in the company. Jihan is now responsible for Bitmain's mining machine manufacturing business and the operation of the crypto mining pool Antpool.

"The reconciliation agreement marks the end of a difficult time. Bitmain did not go bankrupt; on the contrary, it is doing very well now," Wu Jihan said. "Bitmain's cumulative net profit is expected to reach $2 billion to $4 billion. It is a very profitable company."

Wu Jihan's journey in crypto entrepreneurship began when he discovered Bitcoin while working as an investment analyst in Beijing. After studying economics and psychology at Peking University, he was immediately captivated by Satoshi Nakamoto's idea of decentralized digital currency. Wu Jihan quickly dropped out of school to become a certified public accountant, focusing instead on learning about and investing in Bitcoin. After purchasing hundreds of Bitcoins in 2011, Wu Jihan invested in ASIC Miner, a Bitcoin mining company founded by Canaan Creative in 2012. The profits he gained from this investment, along with funds from other investors, led him to co-found Bitmain with Jihan in 2013.

Jihan was a chip designer who had been running his own set-top box business before collaborating with Wu Jihan. Together, they established Bitmain, becoming one of the earliest manufacturers of specialized chips for mining Crypto, known as application-specific integrated circuits (ASICs). Wu's initial goal was to be a venture investor behind Bitmain, but after investing, he quickly realized that running a tech startup was very demanding and required his involvement in the company's management.

In less than four years, Bitmain became the most influential company in the Bitcoin economy. Bitmain's vertical integration extended from designing chips for its mining machines to assembling hardware and selling it to customers worldwide. Meanwhile, Bitmain also operated mining pools according to customer contracts and owned several of its own pools. By 2018, Bitmain's pools accounted for about 37% of the total processing power of the Bitcoin network.

Despite regulatory challenges being an issue for the global crypto market, Wu Jihan believes the industry will continue to develop unique innovations, as it is not constrained by traditional financial systems. "Innovations like DeFi are amazing," Wu Jihan stated. "Technologies like crypto and blockchain have created a new world, allowing fintech entrepreneurs to achieve great success. Ultimately, traditional financial institutions and regulators will accept blockchain technology."