Grayscale, the world’s largest cryptocurrency asset manager, has announced a new investment product that offers exposure to Bitcoin mining hardware.
The fund will raise money to buy Bitcoin ASIC machines, which will be operated by Foundry Digital to mine and sell Bitcoin on behalf of investors.
Grayscale strategic mining game
According to Grayscale’s web siteGrayscale Digital Infrastructure Opportunities LLC (GDIO) aims to create an income stream that differentiates itself from “traditional income-oriented investments.”
The company will aim to buy mining hardware, buy and sell Bitcoin daily, and distribute operating income to investors on a quarterly basis.
“After talking to Mike Colyer [CEO of Foundry] and the Foundry team about crypto winter, we agreed that there was an opportunity to connect investors directly with cryptocurrency mining,” said Michael Sonnenshein, CEO of Grayscale. Twitter Thursday. “GDIO is the result.”
The “crypto winter” of 2022 has seen the price of Bitcoin plunge 70% from its highs last November, taking several companies in the crypto industry with it. Some of these companies included Bitcoin Minerswho saw their effective profits from minting new Bitcoins decline in exact proportion to their price.
Since mining is now less profitable than during the bear market, a central point of GDIO’s investment thesis is the opportunity to buy Bitcoin mining machines at distressed levels.
The organization is betting that Bitcoin will return to higher prices down the line, as part of a four-stage mining cycle: the “Rising Bull,” the “Mining Gold Rush,” the “Inventory Flush,” and the “Shakeout”.
Grayscale said that the mining cycle has now entered its “Inventory Flush” stage, where the hash rate remains high, but the price of Bitcoin has declined substantially. The subsequent “shakeout”, according to the theory, will cause the hash rate to drop as miners will be forced to shut down their machines.
“Historically, deploying capital in a ‘Shakeout’ phase and exiting in a ‘Mining Gold Rush’ phase is the most profitable,” the company said.
The product is open to accredited investors only and requires a minimum investment of $25,000.
A long-term commitment
Both Sonnhenshein and Colyer held a taped discussion about their partnership in person. Sonnenshein explained that for Grayscale, GIDO will provide a “complementary” investment opportunity, along with the asset manager’s other products.
For Foundry, Colyer stressed that now is “a good time to start leaning back and reinvesting in the space.”
“We think there’s going to be a lot of opportunity to continue to build the network … and we think that in the long term, it’s a great investment,” he said.
Grayscale currently owns the largest Bitcoin fund on the planet, responsible for holding over 600,000 Bitcoins worth approximately $12.7 billion. This is more than 3% of the total network supply.
The fund provides investors with general exposure to the price of Bitcoin through a more traditional investment offering. However, there is currently the Grayscale Bitcoin Trust (GBTC). trade at one of its highest discount rates, meaning the value of its shares is less than the underlying Bitcoin it is supposed to represent.
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