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Cash-strapped bitcoin miners are cutting loans and downsizing their businesses as the crypto mining industry continues to weather a plunge in digital asset prices.
Cash-strapped bitcoin miners are cutting loans and downsizing their businesses as the crypto mining industry continues to weather a plunge in digital asset prices.
In the historic bull market of late 2021, miners raised billions of dollars of debt to fund business expansion. But since the crash early last year, listed miners have refinanced, selling their coin holdings and stocks to pay off loans and cover operating costs.
“Miners are looking to deleverage to avoid margin calls and imminent liquidity crises if Bitcoin falls below a certain price,” said Wolfie Zhao, an analyst at cryptocurrency consulting firm BlocksBridge. .
Miners like Marathon Digital Holdings have raised hundreds of millions of dollars in coin-backed loans from crypto-friendly banks like Silvergate Capital reeling from the crypto industry meltdown. there is
Core Scientific, the largest bitcoin miner by computing power, was the first major public mining company to declare bankruptcy in December, after cash flow problems led to falling bitcoin prices and rising energy costs. was quoted. The Austin, Texas-based company is trying to come up with a plan to pay back its creditors.
Last month Marathon cleared $30 million in revolver debt and increased its unlimited cash to more than $100 million, according to BlocksBridge.
Debt financing by 15 major public mining companies has been declining since the first quarter of 2022, narrowing to $112.6 million for the first time in the third quarter, according to data compiled by BlocksBridge. This compares to first and second quarter totals of $348 million and $188 million respectively, according to BlocksBridge. Overall, net spending on mining infrastructure fell 77% to $180 million in the third quarter compared to the previous quarter, according to the company’s latest data.
A sudden drop in the price of Bitcoin could lead to a significant drop in liquidity. Bitcoin rose by more than $45,000 in March 2022, but a month later he fell to $29,000 as the cryptocurrency Terra Luna crashed, making nearly $40 billion in the crypto market. Lost. Tight monetary policy by the US Federal Reserve (Fed) and the collapses of major digital asset firms such as hedge fund Three Arrows Capital and cryptocurrency exchange FTX have also weighed on token prices over the last year. Bitcoin he fell about 65% in 2022.
Some miners, such as Riot Platforms Inc. and Bitfarms, started selling their coin holdings last year to increase liquidity. Marathon, which tends to keep mined coins, still has 12,232 bitcoins on its balance sheet. About 36% of the reserves are capped and pledged against the remaining loans as of Dec. 31, according to BlocksBridge.
Core Scientific and Riot have sold shares to raise money during the recession. Argo Blockchain proposed to issue shares last year, but the proposal did not go through.
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