'Painful' scenario for Bitcoin miners

 Bitcoin miners are borrowing about $4 billion, collateralized by rigs, but both miners and Bitcoin

Not many Bitcoin miners have fallen into default yet. However, many of these are starting to show signs of trouble. For example, Core Scientific, which specializes in providing Bitcoin mining infrastructure to US customers, had to sell 2,000 Bitcoins in May for operating expenses. Bitfarms, a Canadian cryptocurrency miner, also sold nearly half of its mined coins in early June to pay off part of a $100 million loan to Galaxy Digital.

"At this price point, operations are having negative margins. The value of the machine has also plummeted and is in the process of 'price detection', while energy prices fluctuate and supply is limited," Jankovic said. .

Bitcoin mining, simply understood, is the activity of using a powerful computer system to process transactions and receive rewards in Bitcoin or tokens. It used to be one of the most profitable businesses, with profit margins that can reach 90% during crypto bulls. However, due to strong price fluctuations, this business segment often finds it difficult to get loans from traditional financial institutions, or to accept loans with high interest rates.

To fill the gap of this market, a number of cryptocurrency lenders such as Galaxy Digital, BlockFi, Celsius Network, etc., have extended their collateral as the mining rigs themselves, in addition to the money payments. face. This has created a big risk in the context of the market going down.

“Companies are worried about their loans, especially loans with high collateral ratios,” said Ethan Vera, co-founder of bitcoin mining firm Luxor Technologies. According to Vera, many miners once thought they would be in a field that could easily raise capital and bought tens of thousands of machines and staked but now cannot fulfill their obligations.

According to this expert's estimate, cryptocurrency miners are borrowing at least $4 billion in debt and collateralized by machines, more than even token-backed loans.
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