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Cryptotrading firm rents world’s priciest offices

RISKS AND OPPORTUNITIES:BitMEX leased the 45th floor of Hong Kong’s Cheung Kong Center. Meanwhile, analysts warn that Bitmain may be losing its tech edge

Bloomberg

A cryptocurrency trading platform cofounded by former Citigroup Inc trader Arthur Hayes just rented the world’s most expensive offices, a Hong Kong newspaper reported.

BitMEX leased the 45th floor of the Cheung Kong Center, the Hong Kong Economic Times reported yesterday, citing people it did not identify.

The skyscraper is home to Goldman Sachs Group Inc, Barclays PLC, Bank of America Corp, the securities regulator, Bloomberg LP and billionaire Li Ka-shing’s (李嘉誠) empire.

Cryptocurrency firms are trying to vault from the fringes of finance to the mainstream despite a 65 percent slump in Bitcoin prices from December last year’s peak raising questions about the industry’s sustainability.

Splashing out on expensive offices might be a sign of how trading venues like BitMEX can prosper even when volatile markets cause investors pain.

Hayes did not respond to e-mails seeking comment.

In January, when Bloomberg interviewed Hayes, BitMEX was in sparsely decorated offices in a logistics and warehouse district on the other side of Victoria Harbor. Rents in the building were HK$25 (US$3.18) per square foot (0.09m2), according to an advertisement in a nearby real-estate agency.

That compares with a record HK$225 per square foot for the Cheung Kong space cited by the Hong Kong Economic Times.

Laid off from Citigroup, Hayes was inspired to cofound the business in 2014 after he discovered he could make “easy money” by exploiting price differences for bitcoin in Hong Kong and China.

Today, BitMEX offers leveraged contracts bought and sold in the cryptocurrency.

According to yesterday’s report, the firm’s expansion plans spurred the decision to rent an entire floor of the Cheung Kong Center — about 20,000ft2 — after earlier considering taking only half that.

Unlike bitcoin, Hong Kong’s property prices have only been moving in one direction. The Central District has the world’s highest office occupancy costs, according to CBRE Group Inc, which cited a survey from the first quarter.

It was the third year in a row that Hong Kong had topped the survey. London’s West End ranked second.

Separately, Bitmain Technologies Ltd (比特大陸), the designer of cryptocurrency mining chips that is planning a landmark initial public offering (IPO), might be losing its technological edge, Sanford C. Bernstein & Co said.

The Beijing-based firm, cofounded by 32-year-old billionaire Wu Jihan (吳忌寒), might need to write down the value of its inventory as makers of rival mining gear catch up, analysts led by Mark Li at Bernstein wrote in a report dated yesterday.

Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which produces chips designed by Bitmain, should ask the company to make full prepayments and refrain from adding capacity solely for crypto-related demand, the Bernstein analysts said.

“The competitiveness of Bitmain’s chips is in question,” they wrote.

While Bernstein called Bitmain’s performance last year a “wild success” and noted that it controlled an estimated 85 percent of the market for cryptocurrency mining chips, the company is facing growing competition from players such as Canaan Inc (嘉楠耘智) and Ebang International Holdings Inc (億邦國際控股), which are also pursuing IPOs in Hong Kong.

Demand for all of the companies’ products has come under pressure this year after a selloff in virtual currencies cut bitcoin’s value by more than half.

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