German Firm Xolaris Launches Private Equity Fund For Bitcoin Mining
Xolaris Service KVAG, a German-based fund management company for alternative investments, recently launched the first regulated Bitcoin mining fund targeting professional investors.
Announced November 29, 2018, the private equity fund makes indirect investments in the infrastructure and other mining hardware, a move the firm has taken after its clients asked for a “regulated product.”
“Professional investors kept asking us to create a regulated product in the area of cryptocurrencies,” explained Stefan Klaile, the firm’s head of Portfolio Management Board.
According to Xolaris, a firm whose expansion efforts have seen it open offices in Hong Kong, says that there is a lot of demand for crypto-related investment products from its customers, despite a recent market downturn that has seen Bitcoin (BTC) prices reach levels just shy of $3,000.
The initial investment fund allows professional investors to register with a minimum of $285,000. There will be about $34 million in the first issue, though the firm has said that it would increase that volume to $57 million if investor demand remains high.
Xolaris will invest up to 96.4 percent of the funds contributed, and expects that the total operating costs will be 1.1 percent per annum. The approximate investment period is four years, ending on December 31, 2022.
The fund is run as a joint project that brings on board Marc Stehr, the owner, and operator of Sweden based mining farm. In their joint venture, the two firms will use the initial capital to expand the farm’s mining operations.
In choosing to work with Marc Stehr, the German investment manager considered Stehr’s company had extensive expertise in the bitcoin mining industry and the fact that it already had access to mining infrastructure that is already operational.
Sweden also provides a favorable environment, primarily a cooler climate that reduces the need for costly cooling equipment. There is also access to cheap green energy, with country’s economic and political landscape providing a stable framework for business.
More importantly, the Swedish miner has proven that they can “successfully produce Bitcoin,” which according to Klaile, “eliminates a number of risks.”
Mining profitability has dropped in tandem with the drop in cryptocurrency prices. The situation has seen Chinese miners dump their mining hardware en mass.
U.S.-based mining firm Giga Watt was also forced to file for bankruptcy due to the low profitability, with millions owed to service providers.
However, CoinShares published its bi-annual report that showed Scandinavian countries could provide an attractive destination for mining firms.
Last week, the Commons Foundations and the Paraguayan government announced plans that would see the South Korea based blockchain firm build the world’s largest Bitcoin mining farm.
Bitcoin (BTC) is trading at $4,200 against the US dollar and is currently down under 1 percent on the day, after touching highs of around $4,300 earlier.
(Source: XOLARIS Service KVAG)
Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.