Blockstream, a leading Bitcoin infrastructure company, has announced a new investment product that aims to capitalize on the anticipated recovery of the ASIC mining hardware market. The Blockstream ASIC (BASIC) Note is a digital security that will be issued on the Liquid Network, a sidechain-based settlement network for traders and exchanges.
What is the BASIC Note?
The BASIC Note is an investment vehicle that will use the funds raised from investors to purchase and store ASIC mining machines at low prices. ASICs are specialized devices that are used to mine Bitcoin and other proof-of-work cryptocurrencies. The price of ASICs tends to fluctuate with the price of Bitcoin, as well as the supply and demand dynamics of the mining industry.
According to Blockstream, the current market conditions present a unique opportunity to acquire ASICs at a fraction of their peak value. The company expects that the demand and price of ASICs will increase in the near future, especially as the next Bitcoin halving event approaches in April 2024. The halving will reduce the block reward for miners by 50%, making mining more competitive and profitable for those who have efficient and modern hardware.
The BASIC Note will leverage Blockstream’s expertise and experience in the mining sector, as well as its partnership with STOKR, a digital platform for alternative assets based in Luxembourg. The note will be compliant with EU regulations and will be available to accredited international investors. The note will also have a bitcoin-centric return strategy, meaning that fees will only be charged when the product outperforms bitcoin.
How does the BASIC Note work?
The BASIC Note will have a total issuance of $50 million, divided into eight rounds of $5 million each. The first round, Series 1, will consist of 44 notes priced at $115,000 each. The notes will have a maturity of 24 months, with an expected return of 12% to 18% in bitcoin terms.
The funds raised from each round will be used to purchase ASICs from various manufacturers and suppliers at discounted prices. The ASICs will be stored in bonded warehouses until they are sold at higher prices when the market recovers. The proceeds from the sales will be distributed to the note holders according to their pro-rata share.
The note holders will also have the option to redeem their notes for physical delivery of the ASICs at any time during the term of the note. This will allow them to benefit from the potential increase in mining profitability as well as hedge against any market risks.
Why invest in the BASIC Note?
The BASIC Note is designed for investors who want to gain exposure to the Bitcoin mining industry without having to deal with the operational and technical challenges involved. By investing in the note, investors can benefit from Blockstream’s expertise and network in the mining sector, as well as its innovative use of the Liquid Network to issue digital securities.
The note also offers a unique opportunity to profit from the expected recovery of the ASIC market, which has been affected by various factors such as:
- The decline in Bitcoin price from its all-time high of over $60,000 in April 2021 to around $30,000 in August 2023.
- The crackdown on Bitcoin mining in China, which forced many miners to relocate or sell their equipment at low prices.
- The rising energy costs and environmental concerns that have increased the demand for more efficient and sustainable mining solutions.
- The limited supply and availability of new ASIC models due to chip shortages and production delays.
Blockstream believes that these factors have created a perfect storm for undervalued ASICs, which can be acquired at scale and resold at higher prices when the market rebounds. The company also anticipates that the upcoming Bitcoin halving will create a surge in demand for modern and energy-efficient ASICs, as miners will need to upgrade their hardware to remain competitive and profitable.
Blockstream CEO and co-founder Dr. Adam Back commented on the launch of the BASIC Note:
“Since our founding in 2014, Blockstream has continuously been a leader in Bitcoin mining, from providing world-class mining infrastructure to delivering innovative investment vehicles like the Blockstream Mining Note. The BASIC Note arrives at an opportune time in the market, presenting a unique and carefully timed investment opportunity for any bitcoin-focused portfolio.”