Bitcoin BTC/USD asset management firm Grayscale announced a new investment product that gives investors exposure to Bitcoin mining equipment.
The fund will generate money to purchase Bitcoin ASIC computers, which Foundry Digital will run to mine and trade Bitcoin for investors.
The Asset Management Firm’s Strategic Mining Play
The goal of Grayscale Digital Infrastructure Opportunities (GDIO) is to provide a revenue stream that stands apart from "conventional income-oriented investments," as stated on the company website.
The company intends to purchase mining equipment, acquire and sell Bitcoin on a daily basis and transfer operational profits to investors once every three months.
“After talking with Mike Colyer [CEO of Foundry] and the Foundry team about crypto winter, we agreed there was an opportunity to connect investors directly with crypto mining,” Grayscale CEO Michael Sonnenshein said on Twitter. “GDIO is the result,” he added.
Compared to its all-time high in November 2021, the price of Bitcoin and other major cryptocurrencies has fallen nearly 70%, wiping out billions of dollars of investors' wealth and bankrupting several large firms.
Bitcoin miners were among such businesses, and when the value of Bitcoin dropped, so did their revenues from minting new Bitcoin.
Opportunity To Buy Mining Equipment At A Steep Discount
Since mining is currently less profitable than it was earlier, a key component of GDIO's investment thesis is the chance to purchase Bitcoin mining equipment at deeply discounted prices.
The company is placing a wager that Bitcoin will eventually see a price increase as part of a four-stage mining cycle called the "Rising Bull," "Mining Gold Rush," "Inventory Flush" and "Shakeout."
Grayscale claimed that the mining cycle has now reached the "Inventory Flush" stage, during which the hash rate is still high but the price of Bitcoin has dropped significantly.
The idea stated the ensuing "Shakeout" will result in a decrease in hash rate as miners are compelled to shut down their equipment.
“Historically, deploying capital in a 'Shakeout' phase and exiting in a 'Mining Gold Rush' phase is the most profitable,” the company noted.
Grayscale Holds Nearly $13 Billion Worth of Bitcoin
Grayscale presently controls the world's largest Bitcoin fund, which is in charge of holding more than 600,000 Bitcoin valued at about $12.7 billion.
That is more than 3% of the whole supply on the network.
Through a more conventional investment offering, the fund provides investors with broad exposure to the price of Bitcoin.
The Grayscale Bitcoin Trust GBTC, on the other hand, is now trading at one of its biggest discount rates ever, which means that the value of each share is lower than the value of the underlying Bitcoin it is intended to represent.
Photo: yuRomanovich via Shutterstock
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