It is believed that the Bitcoin mining industry took on huge loans during the bull market of 2021 which negatively impacted their bottom lines in the subsequent bear market.
The bankruptcy filing that Bitcoin recently filed Bitcoin
BTC $16,827 mining company Core Scientific despite a $72M loan relief from creditors has raised concerns regarding the overall state of bitcoin mining during a prolonged bear. The reality is that the bitcoin miners in the public sector are in debt of over $4 billion of obligations and will require a swift restructuring to be free of unsustainable debt levels.
There is a reason why the Bitcoin mining community took on huge loans in the bull market of 2021 which negatively impacted their bottom lines in an eventual bear market. Bitcoin mining information analysis through the Hashrate Index show that just the top 10 Bitcoin mining debtors collectively have a debt of more than $2.6 billion.
Core Scientific, the biggest debtor of allhaving $1.3 billion of debts in its balance sheet at the end of September Recently, it applied for Chapter 11 bankruptcy protection in Texas because of a drop in revenues as well as BTC prices. Marathon is the second largest debtor, is owed 851 million in mostly convertible note obligations. This means that Marathon can avoid bankruptcy by allowing holders of the debt to convert the convertible notes into stocks.
Many Bitcoin miners and the third largest lender, Greenidge is undergoing an overhaul process to lower the amount of debt. As an industry, the ratio of debt to equity of the public bitcoin mining firms shows risks that are high.
As outlined by Hashrate Index, a debt-to-equity ratio of at least 2 is considered to be risky for most sectors. The graph below illustrates the extreme high ratios of debt to equity currently being used in the case of some top Bitcoin miners.
Given that over half of the bitcoin mining companies that are publicly traded have very high debt-to-equity ratios. The mining industry could be a victim of potential bankruptcy and restructuring applications unless the bulls can are able to make a comeback.
Although some businesses may reduce or stop operations in order to cut down on the risk of liability, this will aid sustainable miners in expanding their operations as they buy equipment from competitors and facilities.
On December. 20th, Greenidge signed a $74 million debt restructuring deal with NYDIG Fintech firm that is dedicated to Bitcoin.
As Cointelegraph said that the NYDIG agreement would allow the acquisition of miners that have around 2.8 Exahashes per Second (EH/s) in mining capacities. In exchange mining, the company would be able to reduce its debt of $57 between $68 and $57 million.