An Upcoming Bitcoin Hasrate-Backed Product Promises Returns of 10-13%
A Bitcoin mining firm called Luxor Technology has created a hashrate-backed product that offers potential returns of 10% to 13%. Unlike failed products by BlockFi or Celsius, Luxor’s returns come from proof-of-work rather than “ponzi schemes,” according to Luxor. The legitimacy of the product was discussed on a podcast by Peter McCormack, who expressed concern about its worst-case scenario. Luxor’s product works by investors receiving a portion of loan repayments in Bitcoin as collateral, which is then loaned to other miners. The returns are generated when hashrate is bought at a discounted price and sold at a higher price. Luxor estimates investor returns will range from 10% to 13%.
Proceed with Caution: Risks and Warnings
Joe Kelly, CEO of Bitcoin lending firm Unchained, advises caution for those interested in making a return on their Bitcoin through such products. He warns that any investment or loan requiring control over one’s Bitcoin should be thoroughly scrutinized. Kelly believes there may be repeats of failures seen with BlockFi and Celsius unless extreme caution is exercised by investors in the nascent bitcoin lending and borrowing markets.
Luxor Stresses Due Diligence and Counterparty Risk
Luxor emphasizes that their hashrate-backed product is not available to everyone and that only those who pass their due diligence checks can participate. Luxor acknowledges the inherent trepidation surrounding their product due to past bankruptcies but assures investors that they only work with reputable miners and may require them to post insurance as an additional risk mitigation measure. The release date for Luxor’s product has not been disclosed.
Hot Take: The Potential of Hashrate-Backed Products
While the new hashrate-backed product by Luxor Technology promises attractive returns for Bitcoin investors, caution is necessary. The risks associated with entrusting one’s Bitcoin to such products cannot be overlooked. However, Luxor’s focus on proof-of-work and its commitment to due diligence and risk mitigation measures differentiate it from failed projects in the past. With proper scrutiny and careful consideration, hashrate-backed products could potentially provide a new avenue for Bitcoin holders to earn returns on their investments.
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