German investment firm Xolaris has launched a European private-equity fund focused on bitcoin mining. Xolaris expects to raise $34 million to $57 million for the four-year project, the company announced in a press release.
“Professional investors kept asking us to create a regulated product in the area of cryptocurrencies,” said Stefan Klaile, the CEO of Xolaris. The fund has a minimum investment entry of $285,000.
Klaile said the new fund is a joint venture with Marc Stehr, the owner of an existing 2,000-supercomputer mining farm in Sweden. Some of the fund’s capital will be used to expand that data center in Sweden.
“We decided on the joint product with Marc Stehr, because Mr. Stehr already has an existing mining infrastructure in his project that has already proven to be producing bitcoins successfully,” Klaile said. “That means several risks have already been eliminated.”
Xolaris said the location of the bitcoin mining farm in Sweden is ideal because of the country’s cooler climate and cheaper electricity costs.
Sweden also has a political environment that could be more conducive to cryptocurrencies because the country is rapidly becoming a cashless society, as CCN reported.
In fact, some bitcoin miners in Norway are considering relocating to Sweden after the Norwegian government scrapped a tax subsidy on the electricity conferred to bitcoin miners.
The Xolaris Group is also planning to launch a separate $50 million bitcoin mining fund in Hong Kong targeting Asian investors.
Stefan Klaile said subscription for the Asian fund would start in December, after it rolls out its flagship European fund. Klaile is unfazed by the current crypto bear market, saying it’s actually an advantage for his firm because it will eliminate competition.
“We see the current price decline in bitcoin rather positively,” Klaile told the South China Morning Post. “Bitcoin mining return is affected by a combination of drivers, including bitcoin price levels, hashrate, mining difficulty, and the price of mining equipment such as servers. We see recent developments as giving [our mining farm operator] the opportunity to increase our market share.”
Klaile said while the success of his crypto investment funds depends on bitcoin performance, that doesn’t mean everything has to stop because of a temporary market downturn.
“Just like the car industry, a car maker does not stop building cars just because the market for used cars once collapsed,” he said.
Stefan Klaile echoed the sentiments of Barry Silbert, the founder of crypto investment fund Digital Currency Group.
Despite the hand-wringing over escalating mining costs, Silbert said bitcoin mining costs are not the proper benchmark with which to value cryptocurrencies as an asset class, as CCN reported.
“I don’t agree with the premise that bitcoin mining costs should be used as a good entry point,” Silbert said (see video starting at 3:43). “You have to separate the investment decision that a miner is making from the operating cost for them to mine the bitcoin.”
Silbert said cryptocurrency mining operations have a long-term focus; they’re not thinking about short-term gains or losses.
“Miners are long-term investors,” he explained. “The mining businesses that have been created over the past five years have accumulated massive amounts of capital. They have the ability to continue mining at a loss [because they’re going long].”
As CCN reported, crypto mining firm Coinmint plans to invest up to $700 million to build the world’s largest bitcoin mining center in upstate New York.
Coinmint has already invested $50 million so far to convert a 1,300-acre Alcoa aluminum smelting plant in Massena, New York.
The new mining farm is expected to be fully operational by June 2019. Coinmint signed a 10-year lease on the property, signaling its long-term confidence in bitcoin.
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Last modified: December 1, 2018 19:39 UTC