German private equity fund bets on bitcoin mining in cryptocurrency slump

While thousands of miners in China, hurt by the recent slump in bitcoin, have called it a day, German private equity firm Xolaris is preparing to launch a US$50 million bitcoin farming fund targeting Asian investors. The Munich-based private equity manager’s entry into the Asian market, including a new office set up in Hong Kong in July, comes at a time when cryptocurrencies have lost as much as US$700 billion in market capitalization this month. Stefan Klaile, the managing partner of Xolaris Group, said subscription for the Asian fund would start in December after the launch of its European mother fund this week. The European fund aims to raise €30 billion to €50 billion, with a targeted annual return of 21 percent. The proceeds will be used to fund the expansion of an existing bitcoin mining farm housed in a data centre in Sweden. “For our fund, we see the current price decline in bitcoin rather positively,” 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. We see recent developments as giving [our mining farm operator] the opportunity to increase market share.”