Bitcoin miner Core Scientific, which recently filed for bankruptcy, received $72 million in debt relief from creditors, but the bankruptcy of the company has also raised questions about how long the Bitcoin mining industry can survive the prolonged bear market. Currently listed bitcoin miners have more than $4 billion in debt and may need immediate restructuring to avoid unsustainably high debt levels.
The Bitcoin mining community took out a lot of loans during the bull market in 2021, but this will hit the company’s profits during the ensuing bear market. According to the Bitcoin mining data analysis of Hashrate Index, the debtors of the top 10 Bitcoin mining companies alone have a total debt of more than 2.6 billion US dollars.
Among them, Core Scientific is the most indebted, with $1.3 billion in liabilities on its balance sheet as of the end of September. The company has filed for Chapter 11 bankruptcy protection in Texas, citing falling revenue and bitcoin prices. The second most indebted mining company is Marathon, with $851 million in senior convertible debt. Therefore, Marathon avoids bankruptcy by allowing creditors to convert bonds into stocks.
Most bitcoin miners, including Greenidge, which has the third-largest debt, are in the process of restructuring to reduce debt. In terms of the overall cryptocurrency mining industry, the debt-to-equity ratio of listed bitcoin mining companies presents a high risk status.
Hashrate Index pointed out that in most industries, a debt ratio above 2 is considered high risk. The lower bulge shows that some high-profile Bitcoin mining companies now have extremely high debt ratios.
Since more than half of the 25 listed Bitcoin mining companies have extremely high debt ratios, this means that unless the bull market recovers, the crypto mining industry will inevitably face restructuring or filing for bankruptcy.
While some companies may close or slow down operations to reduce debt, this will help sustainable miners expand their operations as they acquire mining equipment and facilities from rival peers.
Greenidge signed a $74 million debt restructuring agreement with New York Digital Investment Group (NYDIG) on the 20th of this month. According to the agreement reached, NYDIG will purchase mining machines with a computing power of 2.8 EH/s per second, and NYDIG will agree to reduce its debt by approximately US$57 million to US$68 million.
On the other hand, the winter storm in the United States has also seriously affected the computing power of Bitcoin mining companies, and even caused some of them to temporarily close down. At least 1.5 million homes across the United States were without power and 22 people died as arctic and winter storms unleashed winds and snow that knocked out power lines and temperatures dropped to freezing temperatures. The hash rate (a measure of computing power) of the Bitcoin network has also dropped significantly.
According to CoinMetrics, the bitcoin hash rate has dropped more than 30% since last Saturday, from 230 EH per second to 155 EH per second, as many of the largest mining operations fell after the National Weather Service warned of an impending polar cold snap. or suspend operation.