Some mining companies are having trouble servicing loans secured by Bitcoin mining equipment. According to Bloomberg, the total risk for creditors can reach $4 billion.
The situation arose both due to the deteriorating situation in the cryptocurrency market and the negative revaluation of ASIC devices.
So far, only a few miners have defaulted on 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 $100 million loan to Galaxy Digital Holdings Ltd.
ASIC price dynamics
Bloomberg predicted that the problems in the industry would worsen if the price of bitcoin continued to decline. 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 has dropped by 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 data center space,” said Luka Janković, Head of Lending at Galaxy Digital.
The latter, as well as NYDIG, BlockFi, Celsius Network, Foundry Networks and Babel Finance, have been actively lending against the security of equipment, said Ethan Vera, co-founder of the Luxor Technologies mining pool. They are worried 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 production cost
Arcane Research analyst Yaran Mellerud estimates that assuming average electricity prices and using the latest ASIC devices, the cost of mining 1BTC could be $8,000. Even if profitable, it will be difficult for some companies to do without selling bitcoin to meet their loan obligations, the expert added.
CEO Securitize Capital Wilfred Day allowed a number of miners to leave, who lost the opportunity 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 may exceed $20,000.
“They bought dozens thousands of machines, agreed on hosting, made deposits and now cannot fulfill their obligations, ” – explained Day.
Compass Mining content director Will Foxley announced an increase in the cost of attracting capital due to worsening risk appetite.
Recall that on June 22, the bitcoin network hashrate fell below 200 EH/s. On June 11, it was the highest in history 231 EH/s.
Earlier, Glassnode analysts recorded the capitulation of miners after the price of bitcoin fell below $20,000.
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