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500.com’s Shares Jump Following BTC.com Mining Pool Acquisition

Shares of Chinese lottery company 500.com Limited jumped as much as 75% in trading on Tuesday to settle at a 38.9% gain towards the end of day after it announced its acquisition of a major mining pool with links to Jihan Wu’s Bitfawn.

The company, which recently disclosed its plans to go into Bitcoin mining following the successful experience of its associate, Loto Interactive Limited, acquired BTC.com and its associated business of Bitdeer Technologies, as a privately-held company that operates from both Amsterdam and Beijing. 

It signed an exchange agreement to issue 44,353,435 Class A common shares to the Blockchain Alliance Technologies Holding Company – each at a value of US$0.00005 – in exchange for Blockchain Alliance’s holdings  including all the mining pool operations of Bitdeer Technologies under BTC.com, the BTC.com domain name and the BTC.com cryptocurrency wallet being transferred to 500.com.

The agreement also contains a gambling clause that could see 500.com issue additional Class A common shares to the Blockchain Alliance if BTC.com’s mining pool business can achieve net operating profits in the 2021 fiscal year or issue a maximum of 22,176,718 Class A ordinary shares (approximately 5% of the company’s shares issued on January 31, 2021) if the net operating profit exceeds US$20 million.

On the other hand, the clause allows 500.com to repurchase part of the Class A common shares held by the Blockchain Alliance if the BTC.com mining pool business incurs a net operating loss in the 2021 fiscal year or repurchase up to 4,435,344 Class A common shares (approximately 1% of the company’s shares issued on January 31) if the net operating loss is greater than US$10 million.

In addition to its digital wallet, API and explorer, BTC.com offers a multi-currency integrated mining pool established in 2016 to support various cryptocurrencies including BTC, BCH, ETH, LTC etc. As at this writing, Coin.Dance puts BTC.com pool’s contribution to the total Bitcoin hash rate in the last seven days at almost 10% making it the sixth largest mining pool globally. 

Blockchain Alliance will lock up the Class A common shares obtained in the transaction whose first settlement is expected to be completed before April 15, 2021. Jihan Wu, the co-founder of Bitmain, is the chairman of the board of Bitfawn which is the parent company of Blockchain Alliance.

The news of 500.com’s acquisition coincides with the price of Bitcoin briefly climbing to over $50,000, a feat it has never achieved in its over a decade history. Reaching the new all time high, according to crypto analytics firm, GlassNode, has now made the number of Bitcoin wallet addresses holding at least $1 million worth of $BTC be more than 94,000. 

It points out that all early miner addresses (50 BTC rewards) had been made millionaire addresses following the steep increase in mid-December when Bitcoin crossed $20,000.

A day before Bitcoin blew past the $50,000 price tag on Tuesday Feb 16, the firm had noted that previous Bitcoin bull markets were “characterized by fingerprints of increased miner outflows of $BTC that had been acquired throughout prior years”. However, despite seeing “slightly higher outflows of older BTC” the firm adds that “this same pattern has not emerged in the current bull market” leaving open its option to growth. 

Bitcoin is still following a bullish trend even as trading volume on CME crossed the $5 billion mark for the first time.

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