Blockstream aims to raise $50 million to acquire miners, creating favorable conditions for undervalued ASICs.

Blockchain technology company Blockstream is aiming to raise as much as $50 million to acquire and store mining equipment that it considers to be undervalued in secondary markets.

In an exclusive interview with Cointelegraph, Blockstream’s mining sales director James Macedonio elaborated on the firm’s strategy to capitalize on a significant disparity between the value of Bitcoin (BTC) and ASIC mining equipment.

Blockstream is collaborating with Luxembourg-based digital securities platform STOKR to introduce the Blockstream ASIC (BASIC) Note. Macedonio mentioned that Blockstream intends to initially secure $5 million for its Series 1 BASIC Notes, each priced at $115,000, to purchase ASICs in bulk, store them, and subsequently sell them back to the market as demand for hardware increases into 2024.

The 24-month investment note will be accessible to accredited international investors, with Macedonio indicating that the firm expects to see returns within 12 to 18 months, taking into account Bitcoin’s upcoming mining reward halving scheduled for April 2024.

Blockstream also emphasizes that BASIC is designed as a Bitcoin basis investment vehicle aimed at “generating a bitcoin-on-bitcoin return.” The company anticipates that the majority of investments will be made using BTC.

Macedonio pointed out that the cost of ASIC miners—specialized hardware utilized for mining proof-of-work cryptocurrencies like Bitcoin—is nearly ten times lower than its peak around December 2021.

“The price of Bitcoin is half of what it was, but ASICS are a tenth of what they were, and historically they’ve been highly correlated.”

Blockstream’s team has previously indicated that the value of ASIC miners generally correlates with Bitcoin’s price fluctuations, with increases in BTC value leading to higher miner prices.

ASIC price index reflects the current price per terahash of various Bitcoin mining ASICs categorized by three efficiency tiers. Source: ASIC Index Data

Macedonio identified several factors that have influenced the stagnant pricing of mining hardware in contrast to Bitcoin’s recent price recovery to approximately $30,000.

“A lot of companies over-leveraged themselves using Bitcoin as collateral. So when Bitcoin went down, they defaulted. Some of those lenders had a large inventory of miners that were pushed into the market.”

Rising energy costs in 2022 posed challenges to Bitcoin miners’ profitability, contributing to the oversupply of ASIC miners in secondary markets. Macedonio stated that the lack of recovery in ASIC miner prices is attributed to insufficient operational capacity and challenges in securing funds to acquire additional hardware.

Related: Blockstream raises $125M to finance expanded Bitcoin mining operations

Blockstream expects a favorable price correction for ASIC hardware and intends to raise funds to purchase ASIC equipment to be stored in bonded warehouses.

Blockstream aims to raise a target of $50 million through $5 million tranches. Macedonio added that while the company will focus on acquiring the most efficient machines from secondary markets, the potential for a Bitcoin bull run could increase demand for less efficient machines:

“If Bitcoin goes to $70,000 or more, people are going to try to get their hands on any ASICs they can just to start mining because their profitability would be so great.”

Blockstream is primarily planning to acquire mining equipment from Bitmain and MicroBT, with Macedonio noting that this hardware is widely available and has historically maintained good resale value.

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