(Bloomberg) -- Grayscale Investments, the largest crypto asset manager, is shifting strategy during the midst of the market downturn by setting up an entity seeking to buy Bitcoin mining equipment at distressed prices.
The New York-based firm will form Grayscale Digital Infrastructure Opportunities LLC (GDIO), which will be available to accredited investors such as hedge funds and family offices at a minimum investment of $25,000. GDIO plans to purchase the computer rigs used in mining and hopes to profit by selling the Bitcoin earned in the process, Grayscale’s CEO Michael Sonnenshein told Bloomberg News. Grayscale expects to finish the funding before the end of the fourth quarter. This is likely a three-to-five-year investment, similar to the kind of terms they would see when investing in private equity or infrastructure in other asset classes, he said.
Grayscale is the latest firm aiming to capitalize on the distressed crypto-mining industry. Low Bitcoin prices, high energy costs and fierce completion among miners have depressed the prices of the hardware. The strategy is to buy mining rigs at a steep discount from distressed miners and expand operations at a low cost. Large-scale miner Bitdeer launched a $250 million Bitcoin mining distressed fund last week, while public mining firm CleanSpark Inc. bought a Georgia mining facility and thousands of rigs from another miner for over $30 million.
“We ultimately believe that there is some level of financial distress on mining hardware as the result of the lower pricing environment, which makes it a opportune time for investors to think about leaning into this exposure.” Sonnenshein said.
Foundry Digital, which shares the same parent, Digital Currency Group, with Grayscale, will run the mining operations. The Rochester, New York-based company is one of the major crypto-mining services providers. It has the largest Bitcoin mining pool by computing power in the world, according to data from btc.com. Such companies use software to aggregate computing power from miners and increase their chance to win the Bitcoin rewards by being the first to solve the cryptographic puzzles on the token’s blockchain. The pools charge miners a fee for the services. Foundry also offers other services such as underwriting loans for miners, according to its website.
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