Grayscale Partners With Foundry To Launch Bitcoin Mining Investment Product

Grayscale – the world’s largest cryptocurrency asset manager – has announced a new investment product that provides exposure to Bitcoin mining hardware.

The fund will raise money to purchase Bitcoin ASIC machines, which will be operated by Foundry Digital to mine and sell Bitcoin on behalf of investors.

Grayscale’s strategic mining game

According to Grayscale’s websiteGrayscale Digital Infrastructure Opportunities LLC (GDIO) is aimed at creating an income stream that differs from “traditional income-oriented investments.”

The firm will aim to purchase 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 on crypto winter, we agreed there was an opportunity to connect investors directly with crypto mining,” Grayscale CEO Michael Sonnenshein said over Twitter on Thursday. “GDIO is the result.”

The “crypto winter” of 2022 has seen Bitcoin’s price crumble 70% from its peaks last November – taking several crypto industry firms with it. Some of these companies included Bitcoin minerswhich saw their effective profit from minting new Bitcoin decline in exact proportion to the price.

Given that mining is now less profitable than during the bear market, a key point of GDIO’s investment mission is the ability to buy Bitcoin miners at difficult levels.

The organization is betting that Bitcoin will return to higher prices, as part of a four-stage mining cycle: “Rising Bull”, “Mining Gold Rush”, “Inventory Flush” and “Shakeout”.

Grayscale said the mining cycle has now entered the “Inventory Flush” stage, where the hash rate remains high but Bitcoin’s price has dropped significantly. The ensuing “shakeout,” according to the theory, will cause a hash drop as miners are forced to shut down their machines.

“Historically, it is most profitable to deploy capital in a ‘Shakeout’ phase and exit in a ‘Mining Gold Rush’ phase,” the company says.

The product is only open to accredited investors and requires a minimum investment of $25,000.

A long-term commitment

Both Sonnhenshein and Colyer held a recorded discussion about their partnership in person. Sonnenshein explained that for Grayscale, GIDO will offer a “complementary” investment opportunity, along with the asset manager’s other products.

For Foundry, Colyer emphasized that now is “a really good time to start leaning in and start investing back into the space.”

“We think there will be a lot of opportunities out there to continue to build out the network … and we think long-term, it’s a great investment,” he said.

Grayscale currently holds the largest Bitcoin fund on the planet, responsible for holding over 600,000 Bitcoin worth approximately $12.7 billion. That’s more than 3% of the entire network’s supply.

The fund provides investors with general exposure to the price of Bitcoin through a more traditional investment offering. However, Grayscale Bitcoin Trust (GBTC) is currently trade at one of the highest discount rates ever – meaning the share value is less than the underlying Bitcoin it is supposed to represent.