Just a day back, Bitcoin mining difficulty surpassed the 35.61 trillion mark to create a new record high. The said incline was, notably, the largest spike since 13 May 2021. Parallelly, the previous week, the mining hashrate also crossed 300 EH/s to create a new ATH.
Read More: Bitcoin mining difficulty attains new ATH: Largest spike since May 2021
Now, according to reports, crypto-mining services firm Luxor Technologies has started offering a first-of-its-kind product that will aid institutional investors, hedge funds, etc. to bet on Bitcoin miners’ revenue. The derivative offering—Luxor Hashprice NDF—will provide direct exposure to revenue, shielding it from other variables like operational costs.
A New Bitcoin mining product is in town
As such, the revenue earned per Exahash by Bitcoin miners has been in a persistent and long-term downtrend. In fact, the BTC-denominated reward has been hovering around its all-time low of 4.06 BTC per EH per day. The same translates to $78k to $88k in revenue per EH per day in USD terms. Notably, the current low levels are at par with what was registered in October 2020.
Read More: Bitcoin Hashrate crosses 300 EH/s to create new ATH
Luxor’s non-deliverable forward contract, on its part, trades over the counter. It authorizes traders [contract buyers] to arbitrage revenue that miners make from a hashrate. On the other hand, it gives miners [contract sellers] a way to hedge their mining operations. More so, because they can get cash from selling bets on future production or lock in their future production at a fixed price.
Elaborating the same on a Twitter thread, Luxor noted,
“In addition to giving miners a much-needed hedge, this derivative will allow hedge funds, financial institutions, and other trading firms to gain exposure to Bitcoin mining via hashprice without having to operate physical mining assets.“
At the contract’s expiration, the two parties will settle the difference between the fixed price in the contract and the settlement value of the underlying commodity. Giving an example with respect to how the product functions, Luxor elaborated,
Miners with large reserves on their balance sheets usually resort to option contracts to manage risks associated with the price fluctuation of Bitcoin. As highlighted in several recent articles, miners are now being forced to sell their HODLings to pay back debt and cover other costs.
Also Read: Most Public Bitcoin miners have ‘never’ made a profit: Why?
In such conditions, the new product launch could come to the rescue. Matthew Williams, head of derivatives at Luxor said,
“The derivative could become a major tool for miners as their Bitcoin holdings shrink.”