Blockchain technology company Blockstream is seeking to raise up to $50 million to buy and store mining equipment that it believes is undervalued on the secondary market.
Speaking exclusively to Cointelegraph, Blockstream Mining Head of Sales James Macedonio revealed the company’s plans to capitalize on the “huge gap” in value between Bitcoin (BTC) and ASIC mining equipment.
Blockstream has partnered with Luxembourg-based digital securities market STOKR to launch the Blockstream ASIC (BASIC) Note. Macedonio said Blockstream will invest in Series 1 BASIC notes ($115,000 per unit) to buy and store ASICs at scale and sell them back to the market as demand for hardware increases toward 2024. equivalent) to secure $5 million first.
The 24-month investment note will be available to accredited overseas investors, but Macedonio said the company will not be able to keep the company’s investment in light of Bitcoin’s next mining reward halving, scheduled for April 2024. said it expects to be profitable in 12 to 18 months.
Blockstream also notes that BASIC is intended as a Bitcoin-based investment vehicle with the goal of “generating Bitcoin-on-Bitcoin revenue.” The company also expects the majority of its investments to be in BTC.
According to Macedonio, prices for ASIC miners — specialized hardware used to mine proof-of-work cryptocurrencies like Bitcoin — are down nearly 10 times from their peak around December 2021. .
“Bitcoin’s price is half what it was before, but Asics’ price is one-tenth what it was then, and historically there has been a high correlation between the two.”
The Blockstream team previously pointed out that the value of ASIC miners is usually correlated with Bitcoin price volatility, with BTC price increases leading to higher miner prices.
Macedonio points to several factors contributing to the stagnation in mining hardware prices compared to Bitcoin’s recent price recovery to its current level of around $30,000. .
“Many companies were over-leveraged with bitcoin as collateral. So when bitcoin fell, they defaulted. There was also a place that had a large amount of inventory of
Soaring energy prices in 2022 threatened the profitability of Bitcoin for miners and also contributed to the oversupply of ASIC miners in the secondary market. Macedonio said the lack of recovery in ASIC miner prices is due to the lack of capacity to operate the machines and the difficulty in financing the additional hardware.
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Blockstream anticipates positive ASIC hardware prices and plans to raise funds to purchase ASIC hardware to be stored in its bonded warehouse.
Blockstream is looking to raise its $50 million goal through a $5 million tranche. Macedonio added that the company aims to acquire the most efficient machines on the secondary market, but that a potential bull market for Bitcoin could increase demand for less efficient machines.
“Once Bitcoin hits $70,000 and above, the profit margins are so high that people will grab whatever ASIC they can get to start mining.”
Blockstream primarily plans to purchase Bitmain and MicroBT mining equipment, Macedonio stressing the prevalence of this hardware and historically high resale value.
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