• Mon. Oct 2nd, 2023

Publicly Listed BTC Miners Face Debt Challenges Over $4 Billion

Jan 4, 2023

Hasty Decisions

Decisions taken in haste may bear fruit temporarily but in the long run, they have consequences. This is exactly the situation with which a lot of Bitcoin miners are struggling today.

2021 was undoubtedly the best year not for Bitcoin alone but for the entire crypto economy. The Crypto economy was thriving and so is Bitcoin mining.

There were extraordinary profits for Bitcoin traders while Bitcoin miners were bagging whooping returns against cheaper investments.

Mining was so lucrative that in order for bolstering their Bitcoin mining capacities, miners did not hesitate in borrowing exotic loans.

However, their haste is now showing them the consequences that they had intentionally refused to consider.

Publicly Listed BTC Miners Seeking Bankruptcy Protection

Presently, there is an acute shortage of funds for running mining operations by Bitcoin miners, especially amongst publicly listed BTC miners.

This acute shortage of funds can be judged from the fact that publicly listed BTC miners are under a debt exceeding $4 Billion. Debt payments are due immediately and if not paid then the default is imminent.

For instance, Core Scientific is one of the publicly-listed miners and is desperately in need of restructured finances. Although the miner got a relief package of $72 Million from its lenders, the funds are not sufficient to avoid a potential default.

On the other hand, restructuring would mean paying off exorbitant markups on markups against principal loan amounts.

The entire Bitcoin miners community obtained huge finances from the creditors because they wanted to capitalize bullish Bitcoin market.

Biggest Debtors in BTC Miners’ Community

The number of debtors in the BTC miners’ community is so huge that it can easily be listed into top-5, top-10, and top-20 categories.

However, Bitcoin Scientific is undisputedly the biggest debtor of them all. This miner alone owes more than $1.3 Billion to its creditors.

Incapable of settling the liabilities, Bitcoin Scientific has already sought bankruptcy protection by filing Chapter 11 proceedings in Texas.

At number two spot is Marathon whose liabilities towards its debtors exceed $851 Million.

As compared to Bitcoin Scientific, Marathon is in a better position because its liability is of convertible note kind. Fortunately, Marathon does not need to seek Chapter 11 Bankruptcy protection for the time being.

Meanwhile, the third biggest debtor namely Greenidge has already requested its debtors to restructure the finances. Eventually, Greenidge may avoid the default temporarily but it would simultaneously be increasing the risk.

Usually, business communities avoid restructuring as it increases the burden of settlement of liabilities.

Greenidge’s creditors have agreed to restructure the loans by offering further finances of $74 Million.

Potential Shut Down of Many Miners

Statistics show that there more than a dozen publicly-listed Bitcoin miners out of 25 have applied for restructuring of their credit facilities.

Some of them would eventually get the restructuring while some cannot. Hence, the possibility of shutting down of a few publicly-listed Bitcoin miners cannot be ignored.

Of course, the inability to pay the debt would warrant Chapter 11 filing because there is no other option left for such miners.

Most importantly, considering the prevailing market conditions, there is no certainty that restructuring would do any good. Instead, restructured loans could end up in putting the final nail in the coffin.

Bitcoin miners can avoid bankruptcy and pay debts provided that Bitcoin starts to be traded for over US$19,000 on a long-term basis. Could this happen?

Even one of the largest names in the Bitcoin mining industry, Argo Blockchain, has been forced to make some very serious decisions.

The US-based Bitcoin mining company recently announced that it was facing a major financial crisis. It was not able to pay off its debt and was running out of operational funds.

The company revealed that it could continue operating until the end of 2022. However, it finalized a deal with Galaxy Digital where it sold its major mining facility to the investment company for $65 million.

This goes to show that even the major companies have been facing major upsets and are currently living from hand to mouth.

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