Liechtenstein’s Financial Market Authority (FMA) has approved the launch of a fully regulated Bitcoin mining fund. The product was co-developed by Final Frontier, a Switzerland-based specialist investment firm focused on innovative technologies, and Bitfury Group, one of the industry’s leading infrastructure providers for Bitcoin mining.
The fund is under the supervision of Liechtenstein’s financial regulator and only accessible for institutional and professional investors. The size of the fund was not published.
Bitcoin Mining Fund invests in Bitfury mining sites
The purpose of a Bitcoin mining fund is to provide investors exposure to the benefits of Bitcoin mining. Final Frontier has structured the product and invests in mining sites operated by Bitfury Group. According to the press release, “The fund invests in turnkey assets comprised of mining sites with some of the lowest electricity and operating costs globally that feature state-of-the-art Bitfury datacenters.”
Bitfury Group is a security and infrastructure provider for the Bitcoin Blockchain. The company’s valuation stands at above $1bn. Bitfury late last year raised $80 million from investors including the merchant bank founded by billionaire Mike Novogratz.
Bitcoin Mining has a valid value proposition for investors, but technological, logistical, and financial barriers to entry are high. Thus, Final Frontier’s fund provides a straightforward way to invest in Bitcoin infrastructure to gain exposure to the asset class.
Imraan Moola, co-founder of Final Frontier, commented on the launch, “With the bitcoin price down significantly from its all-time high, yet institutional interest growing every day, now may be an opportune time to consider investing in bitcoin mining.”
German Xolaris launched Bitcoin mining fund in December
Final Frontier’s mining fund is certainly not the first of its kind. In December 2018, German investment firm Xolaris launched a European private equity fund for professional investors. The fund called “Bitcoin Farming” invests indirectly via a target company in Liechtenstein into Bitcoin mining infrastructure companies.
“Professional investors kept asking us to create a regulated product in the area of cryptocurrencies,” said Stefan Klaile, the CEO of Xolaris. Bitcoin Farming announced it would make a range of investments, with the first investment being a mining farm in Sweden, comprising of 2,000 mining computers.
The profitability of Bitcoin mining depends on the price of Bitcoin
Crypto Analyst Alex Kruger says that the recent Bitcoin price rally has made Bitcoin mining profitable again. According to Kruger, the break-even point for Bitcoin mining lies somewhere around $3,550 to $4,350. Considering that the price of Bitcoin is currently at around $5,500, investors can reap a profit of $1,000 for each bitcoin mined.
While the success of Bitcoin mining funds certainly depends on the performance of Bitcoin, some say mining costs do not qualify as a benchmark for mining profitability.
Klaile claims investors do not need to be too concerned with short-term price fluctuations. “Just like the car industry, a car maker does not stop building cars just because the market for used cars once collapsed,” said Klaile. “Bitcoin mining return is affected by a combination of drivers, including Bitcoin price levels, hash-rate, mining difficulty, and the price of mining equipment such as servers,” he says.
Although it’s true that Bitcoin miners are long-term term investors, they still need to cover at least their costs to be able to survive. Even large-scale miners with a massive capital base can’t be mining at a loss forever.
Thus, Kruger is right in saying the margin between the price of Bitcoin and the cost of mining is the key consideration for mining investors. If it’s true that the bear market is over and crypto spring has started, then Final Frontier is launching at the right time.