Industry players accumulated over $4 billion of debt in the last crypto run-up.
According to a recent report by Hash Rate Index, publicly-listed Bitcoin (BTC) miners took on more than $4 billion worth of debt during the run-up to the crypto bull market. Mesmerized by rising prices, industry rushed hand over fist to purchase Bitcoin application-specific integrated circuits miners on easy credit.
However, in today’s context of Bitcoin price collapse, skyrocketing electricity prices, lower market prices for mining rigs, and record-level mining difficulty, 2022 became an extremely difficult year for sector players. That said, some are holding on better than others.
On Jan 3, Bitfarms announced that the company sold 1,755 BTC during Dec. 2022 for total proceeds of $29.9 million. The firm then used this amount to pay down $16.5 million in its BTC-backed facility, along with $2.0 million in equipment-related indebtedness.
Bitfarms also managed to renegotiate miner purchasing agreements leading to extinguishing $45.4 million without penalty while establishing a $22.4 million credit for pre-paid pre-paid deposits to be applied against future purchase agreements. The company mined 5,167 BTC ($86.1 million at the time of publication) for all of 2022 and had an outstanding debt balance of $47.0 million at the year’s end.
The same day, Stronghold Digital Mining announced that it reached an exchange agreement to convert $17.9 million of its debt into preferred stock bearing a face value of $23.1 million. The preferred stock would bear no interest nor dividends, and would, in turn, be convertible into common stock (with negligible par value) at a conversion price of $0.40 per share, which is near the stock’s market value of $0.44 at the time of publication.
Others were not as fortunate. Cointelegraph previously reported on Dec 21 that Greenidge signed a $74 million debt restructuring agreement with creditor NYDIG. The deal, if executed, would provide credit relief at the cost of restructuring the company from an independent Bitcoin miner into a hosting site for NYDIG’s Bitcoin mining rigs. Similarly, Core Scientific, one of the largest players in the sector, managed to secure a $37.4 million loan but nevertheless is undergoing bankruptcy.
Not all Bitcoin miners embarked on credit-fueled expansion strategies. On Jan 3., Digihost announced that it increased BTC production by 60% year over year. The company said it has no debt other than a vendor-take-back mortgage on its Alabama facility in the amount of $934,500. Cointelegraph also previously reported on Dec 21 that German Bitcoin miner Northern Data said the company had no financial debt while expecting $204 million in revenue for 2022.