The Bitcoin mining community borrowed heavily during the 2021 bull market, which negatively impacted its bottom line in a subsequent bear market.
Bitcoin’s recent bankruptcy filing
Miner Core Scientific has raised questions about the overall health of the bitcoin mining community in an ongoing bear market, despite a $72 million relief offer from creditors. It turns out that public bitcoin miners owe over $4 billion in debt and need immediate restructuring to get out of unsustainable debt.
The Bitcoin mining community borrowed heavily during the 2021 bull market, which negatively impacted its bottom line in a subsequent bear market. Hash index analysis of bitcoin mining data reveals that only the top 10 bitcoin mining debtors cumulatively owe more than $2.6 billion.
Public bitcoin mining companies with the highest level of leverage. Source: Hashrate Index
Core Scientific, the biggest debtor of many – with $1.3 billion in debt on its balance sheet as of September 30 – recently filed for Chapter 11 bankruptcy protection in Texas due to falling revenues. and BTC prices. Marathon, the second-largest issuer, holds $851 million, mostly in convertible debentures. As a result, Marathon avoided bankruptcy by allowing creditors to convert convertible debentures into shares.
Most bitcoin miners, including third-largest debtor Greenidge, are going through a restructuring process to reduce their debt. As an industry, the leverage ratio of public bitcoin mining companies is high risk.
As the Hashrate Index points out, a leverage ratio of two or more is considered risky in most industries. The chart below shows the extremely high leverage ratios currently supported by some of the major bitcoin miners.
Public bitcoin mining companies with the highest leverage. Source: Hashrate Index
Given that more than half of the 25 public Bitcoin miners have extremely high debt ratios, the mining sector could face potential restructuring and bankruptcy filings if the bulls do not return.
While some companies may shut down or slow down operations to reduce liability, this will help sustainable miners expand their footprint by buying out competitors’ equipment and facilities.
Related: Bitcoin Miner Northern Data Says It Has No Financial Debt, Expects $204 Million in Revenue in 2022
On December 20, Greenidge signed a $74 million debt restructuring agreement with NYDIG, a dedicated Bitcoin fintech.
As Cointelegraph reported, the NYDIG deal would see the purchase of miners with a mining capacity of around 2.8 exahashes per second (EH/s). In return, the mining company would see its debt reduced from $57 million to $68 million.