Blockchain technology company Blockstream is seeking to raise up to $50 million to buy and store mining equipment it believes is undervalued on the secondary market.
In an exclusive interview with Cointelegraph, Blockstream mining sales head James Macedonio revealed that the company plans to take advantage of the “huge separation” in the value of Bitcoin (BTC) and ASIC mining equipment.
Blockstream is launching the Blockstream ASIC (BASIC) Note in partnership with Luxembourg’s digital securities market STOKR. Macedonio said Blockstream will first raise $5 million for its Series 1 BASIC notes, worth $115,000 each, to buy ASICs, storage on a large scale, and then sell them back into the market as hardware demand picks up in 2024.
The 24-month investment note will be open to accredited international investors, and Macedonio said it expects to invest within 12 to 18 months, given that Bitcoin’s next mining reward halving is due in April 2024. See returns within.
Blockstream also notes that BASIC is intended as a bitcoin-based investment vehicle designed to “generate bitcoin-to-bitcoin returns.” The firm also expects the majority of investments to be made using bitcoin.
According to Macedonio, the price of ASIC miners (specialized hardware used to mine proof-of-work cryptocurrencies such as bitcoin) is nearly 10 times lower than its peak around December 2021.
“Bitcoin is half the price, but ASICS is a tenth the price, and historically, they have been highly correlated.”
The Blockstream team has previously pointed out that the value of ASIC mining machines is usually correlated with the price trend of Bitcoin, and the appreciation of Bitcoin will cause the price of mining machines to increase.
Macedonio pointed to a number of factors contributing to the stagnation of mining hardware prices compared to bitcoin’s recent price recovery to its current level of around $30,000.
“A lot of companies are over-leveraged using bitcoin as collateral. So when bitcoin goes down, they default. Some of these lenders have huge inventories of miners that are being pushed into the market.”
The surge in energy prices in 2022 has challenged miners’ Bitcoin profitability, which has also created an oversupply of ASIC mining machines in the secondary market. Macedonio said the reason for the lack of recovery in ASIC mining machine prices is the lack of ability to operate the machines and the difficulty of raising funds to buy more hardware.
Related: Blockstream Raises $125M to Fund Bitcoin Mining Expansion
Blockstream expects a positive price adjustment for ASIC hardware and plans to raise funds to purchase ASIC hardware and store it in bonded warehouses.
Blockstream will seek to raise its $50 million goal through a $5 million funding round. Macedonio added that while the company will seek to acquire the most efficient machines on the secondary market, the possibility of a bitcoin bull run could drive demand for less efficient machines:
“If bitcoin goes to $70,000 or higher, people will try to buy whatever ASICs they can to start mining because they will be very profitable.”
Blockstream primarily plans to purchase Bitmain and MicroBT mining rigs, which Macedonio emphasized are popular and have historically had good resale value.
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