Blockchain technology firm Blockstream is seeking to raise up to $50 million in order to capitalize on the undervalued state of Bitcoin (BTC) and ASIC mining equipment in secondary markets. In an exclusive interview with Cointelegraph, James Macedonio, the head of Blockstream’s mining sales, shared the company’s strategy to take advantage of the significant price difference between BTC and ASIC mining equipment.
To execute their plan, Blockstream has partnered with STOKR, a digital securities marketplace based in Luxembourg, to launch the Blockstream ASIC (BASIC) Note. The company aims to secure an initial investment of $5 million for its Series 1 BASIC Notes, each priced at $115,000. These funds will be used to purchase ASICs at scale, store them, and subsequently sell them back to the market when demand for mining hardware rises in 2024.
The investment note has a maturity period of 24 months and will be available to accredited international investors. Macedonio predicts that returns will be realized within 12 to 18 months, taking into consideration the upcoming mining reward halving for Bitcoin scheduled for April 2024.
Blockstream intends for BASIC to function as a Bitcoin-based investment vehicle that generates a return in Bitcoin. The company expects that the majority of investments will be made using BTC.
Macedonio highlights that the current price of ASIC miners, specialized hardware used for mining proof-of-work cryptocurrencies like Bitcoin, is approximately one-tenth of their peak in December 2021. He notes the historical correlation between the price of ASIC miners and the price movements of Bitcoin. When Bitcoin’s price appreciates, miner prices tend to increase as well.
The subdued price of mining hardware is attributed to several factors outlined by Macedonio. Firstly, many companies overextended themselves by using Bitcoin as collateral and defaulted when its price declined. Consequently, lenders possessing a surplus of miners were compelled to flood the market with these devices. Additionally, the surge in energy prices in 2022 posed profitability challenges for Bitcoin miners, contributing to the oversupply of ASIC miners in secondary markets. The inability to operate existing machinery and difficulties in raising funds for further acquisitions have further hindered the recovery of ASIC miner prices.
In light of these conditions, Blockstream anticipates a positive price correction for ASIC hardware and plans to raise capital to purchase such equipment for storage in bonded warehouses. The company aims to raise a total of $50 million through a series of $5 million tranches. Macedonio acknowledges that while the focus will be on acquiring the most efficient machines from secondary markets, a potential Bitcoin bull run could result in increased demand for less efficient machines.
Blockstream’s primary targets for equipment purchases are Bitmain and MicroBT, as these brands have a strong presence in the market and historically maintain good resale value.
The company’s strategic move to invest in undervalued ASIC mining equipment reflects their confidence in the long-term potential of Bitcoin and the expected growth in demand for mining hardware. By securing significant amounts of mining equipment now, Blockstream positions itself to capitalize on the anticipated resurgence in the crypto market.
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