Blockstream targets series 2 continues Bitcoin mining with a basic note
Blockstream aims to store and sell ASICs based on the demand of miners in the next two years, which seems to raise more capital to buy Bitcoin (BTC) mining hardware through the second series of its Blockstream ASIC (BASIC) note offering.
Speaking exclusively to Cointelegraph, Blockstream CEO Adam Back highlighted the surplus of Bitcoin mining hardware on the secondary market as a key driver for his second consecutive investment offering.
Series 1 is sold
Blockstream wound up its first $5-million raise, which was not leveraged by firm buyouts, with $4.87 million in boxed Antminer S19k Pro ASIC miners. The company managed to secure the hardware of one of the most popular miners from the Chinese manufacturer with SunnySide Digital.
“This gives an opportunity because the price of Bitcoin has increased by 2.8 times, and the mining price will decrease. As for the reference point, ASICs were sold at $35 per TH at the beginning of the year and now they are selling at $13.5 per TH with this purchase,” he explained.
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The CEO added that the price of ASICs will be 2.6 times their dollar value by January 2023 and 6.6 times lower than Bitcoin. The latter is the important thing behind it, as Blockstream stores the hardware in warehouses and sells it on the market, with the profitability increasing as miners try to bring more hardware online, along with the speculative price of Bitcoin.
“The fund isn't looking for the highest dollar value to mine; it's looking for the highest bitcoin price to mine.”
Basic Note Strategy “Accidental Users”
Another consideration should be the time when the miners are sold, which should be in several dimensions. One important point may be to reduce the number of mines available on the second-hand market. In return, this forces buyers to go directly to producers, which increases the price per Terhash per unit.
Blockstream experienced this firsthand when it acquired miners for its hosting service in 2021. However, the company was unable to process the hardware for customers and ended up selling some of the surplus miners for “three to four times” more than the miners bought.
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“It wasn't our plan to get into the mine selling game, but we had more inventory than we could handle, so we sold the profits. That opened our eyes to the dynamics between ASIC and bitcoin prices,” he explained.
The result of the Bitcoin bull run
A strategy that reinforces the fundamental note is that being “accidental users” shows the importance of the “time value” of money and why the price of Bitcoin is critical to selling Bitcoin mining hardware for profit.
The bottom line is that Blockstream's expertise in the Bitcoin mining sector is leveraging historically low ASIC prices and promising signs of recovery as a vehicle for #Bitcoin value to be used by the Bitcoin halving in 2024. https://t.co/mx9QJ9STun
— Blockstream (@Blockstream) December 13, 2023
Back explains that miners typically buy hardware for one dollar and calculate how much bitcoin they can mine from that point. However, one must take into account the delivery time from the manufacturer, which means that the investment starts to generate value only after it is delivered and processed.
“We told people, ‘You can pay the manufacturers $60 for a saw, for example, but you'll lose $50 until it arrives.' Or you can pay us $100 in cash. That's a win for you because we can give it to you right away,' he said.
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According to the CEO of Blockstar, the previous Bitcoin bull runs resulted in situations where the cost of electricity decreased as a percentage due to the increase in the price of BTC.
“Profits triple when prices double. “In that situation, people go from being willing to pay $30 to $40 per horse to between $100 and $130, which is what happened last year,” Back recalled.
This provides a “tail end” opportunity to sell the Bitcoin mining hardware that Blockstream has acquired.
A basic note will respond in the future
Blockstream's BASIC Note Series 2 offering may be responsive to market conditions and investor interest. The gauge of how much hardware is being bought on secondary markets is unclear, although depressed prices suggest there is excess inventory.
Luxembourg-based security tokens platform STOKR will manage the second series, which is set to go live around the turn of the new year. The product is available to non-US accredited investors and requires a minimum investment of $115,000 paid in BTC, Liquid Bitcoin (L-BTC) or Tether (USDT).
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