September 26, 2022

Bloomberg: The fall of Bitcoin put $4 billion in miner loans at risk of default

Bloomberg: The fall of Bitcoin put $4 billion in miner loans at risk of default

Some mining companies have encountered problems servicing loans that are secured bitcoin mining equipment. Bloomberg estimates that the total risk to lenders could be as high as $4 billion.

The situation arose both due to the deterioration of the situation in the cryptocurrency market, and due to the negative revaluation of ASIC devices.

So far, only a few miners have defaultedon their loans, but recent sales of mined bitcoins are showing signs of a crisis. The agency recalled the implementation of Core Scientific 2000 BTC to cover operating expenses and Bitfarms 3000 BTC to repay part of the Galaxy Digital Holdings Ltd loan for $100 million.

Price dynamics for ASIC devices

Bloomberg predicted the aggravation of problems inindustry in the event of a continued decline in the price of bitcoin. This could lead to further adjustments in the valuation of the devices and their sale by lenders. According to Luxor Technologies Corp., the price of the popular Antminer S19 is down about 47% from $10,000 in November.

“Mining companies are in pain.Many operations became unprofitable. The cost of equipment has plummeted [...]. This is exacerbated by volatile electricity prices and limited supply of space in data centers.” Luka Janković, head of lending at Galaxy Digital, said.

The latter, as well as NYDIG, BlockFi, CelsiusNetwork, Foundry Networks and Babel Finance have been heavily lending against hardware, said Ethan Vera, co-founder of mining pool Luxor Technologies. They worry about the "health" of their loan portfolios, he said, especially those with high collateral ratios. The specialist estimated the volume of such loans at $4 billion.

Bitcoin mining cost

According to Arcane Research analyst YaranMellerud, assuming average electricity prices and using the latest ASIC devices, the cost of mining 1BTC could be $8,000. Even while maintaining profitability, it will be difficult for some companies to do without selling bitcoin to fulfill their loan obligations, the expert added.

Securitize Capital CEO Wilfred Day steps downa number of miners who lost the ability to generate positive cash flow and purchased expensive equipment. According to the expert, taking into account overhead costs and interest on loans, the cost of mining 1 BTC for them can exceed $20,000.

“They bought tens of thousands of machines, agreed on hosting, made deposits and now they cannot fulfill their obligations,” Day explained.

Will Foxley, Chief Content Officer at Compass Mining, said that the cost of raising capital is rising due to deteriorating risk appetite.

Recall that on June 22, the hashrate of the Bitcoin network fell below 200 EH / s. On June 11, it was the highest ever 231 EH/s.

Earlier, Glassnode analysts recorded the capitulation of miners after the price of bitcoin fell below $20,000.

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