Luxor Technology is preparing to launch a new hash rate-backed product that aims to deliver returns between 10% and 13%. The innovative approach, led by Matt Williams, Luxor’s Head of Derivatives, involves investors providing bitcoin as collateral. Luxor then lends that bitcoin to miners, allowing them to retain ownership of the bitcoin they mine while generating returns from hashrate trading and mining rewards.
This upcoming product differs from the failed ventures of BlockFi and Celsius. Unlike these bankruptcies, Luxor’s product is based on real economic production, marking a novel method in bitcoin investment. Investor returns are generated by miners handing over a portion of their profits to those who finance them, not through rehypothecation.
Part of Luxor’s strategy is to create a hashrate marketplace to give legitimate miners better access to capital. The hashrate is bought at a lower price and then sold at a higher price, generating returns for investors. Luxor only holds bitcoin for a short period of time while acting as an intermediary between investors and mining companies, reducing the counterparty risk associated with Luxor.
Despite this innovative approach, industry figures such as Peter McCormack and Unchained CEO Joe Kelly have expressed concerns and advised caution due to the unstable nature of the bitcoin lending market. To address these concerns, Luxor is implementing risk mitigation measures. These include conducting due diligence on investors and potentially requiring miners to have insurance.
Despite the anticipation surrounding this new product, Luxor Technology has not yet announced a release date. The company remains committed to transparency and risk mitigation as it prepares for launch.
