debt

Bitcoin miners see mixed successes in tackling debt-fueled overexpansion crisis

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.

Top 10 publicly-traded Bitcoin miners by liabilities | Source: Hashrate Index

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. 

Bitcoin ASIC miner prices hovering at lows not seen in years

ASIC miners’ price per terahash has fallen more than 80% from its peak in 2021 as Bitcoin mining machines continue to flood the marketplace.

Bitcoin (BTC) ASIC miners — machines optimized for the sole purpose of mining Bitcoin — are currently selling at bottom-of-the-barrel prices not seen since 2020 and 2021, in what is being viewed as another sign of a deepened crypto bear market.

According to the latest data from Hashrate Index, the most efficient ASIC miners, those generating at least one terahash per 38 joules of energy, have seen their prices fall 86.82% from May. 7, 2021 peak of $119.25 per terahash down to $15.71 as of Dec. 25.

Miners in these category include Bitmain’s Antminer S19 and MicroBTC’s Whatsminer M30s.

The same statement holds true for the mid-tier machines, with prices now averaging out at $10.23 after falling a massive 89.36% from its peak price of $96.24 on May. 7, 2021.

However, the least efficient machines, ones that require more than 68 Joules per terahash, are now priced at $4.72, a 91% drop from their peak price of $52.85. The last time it was priced near this was around Nov. 5, 2020.

Bitcoin ASIC Miner Price Index for machines with varying levels of efficiency. Source: Hashrate Index.

The fall in prices has largely been attributed to large Bitcoin mining companies that have struggled to remain profitable throughout the bear market, with many either filing for Chapter 11 bankruptcy, taking on debt or selling their BTC holdings and equipment in order to stay afloat.

Among the firms to have done that include Core Scientific, Marathon Digital, Riot Blockchain, Bitfarms and Argo Blockchain.

Related: Bitcoin miner outflow ratio hits 6-month high in new threat to BTC price

But the steep price fall has been met with some keen buyers. Among those include many Russian-based mining facilities like BitRiver, which are able to capitalize on relatively low electricity costs, with some up-to-date hardware capable of mining 1 BTC at about $0.07 per kilowatt-hour in the energy-rich nation.

While it’s hard to predict what price direction ASIC miners will head toward next, Nico Smid of Digital Mining Solutions pointed out in a Dec. 21 tweet that ASIC miner prices bottomed at Bitcoin’s last halving cycle in May. 11, 2020 and moved up aggressively shortly after — something which could play out in Bitcoin’s next halving cycle which is expected to take place on April 20, 2024.

Source: Twitter

US Trustee motions for examiner to probe Celsius’ ‘significant transparency issues’

The Trustee overseeing Celsius’ bankruptcy case has requested an examiner to help shed the light on a number of complex issues.

The United States Trustee handling Celsius’ bankruptcy proceedings has called for an independent examiner to be brought in to “untangle” the embattled network’s financial affairs and business operations. 

In a motion filed on Thursday to the United States Bankruptcy Court by William K. Harrington, the US Trustee has asked for an examiner to look into allegations of “incompetence or gross mismanagement” as well as “significant transparency issues” surrounding Celsius’ operations in the context of the bankruptcy case.

Examiners are appointed by bankruptcy courts to investigate details of complex cases brought before them. They are able to present information to the courts from an independent point of view and have been appointed in other high-profile bankruptcy cases such as Lehman Brothers during the subprime mortgage crisis.

According to the motion, the appointment of an examiner would be beneficial to the parties involved, given the complexities of the case, as they could provide information beyond the court’s expertise:

“An investigation by an independent examiner—who would present his or her findings in an understandable way—is essential to provide the Court, the United States Trustee, creditors, and other parties in interest with transparency and clarity as to the business structure, practices, and liquidity of the Debtors.”

Harrington also mentioned that an examiner would be able to determine whether legal claims should be brought against management, as there are claims of “credible allegations of incompetence or gross mismanagement.”

The U.S. Trustee has also suggested there are “significant transparency issues” surrounding Celsius’ business operations.

“The Debtors have not provided adequate information regarding their liquidity position, their business model, the flow of traditional cash funds, or the value of their crypto assets,” Harrington said, adding the information can then be used to help evaluate any proposed restructuring or sale.

Related: Celsius CEO personally directed crypto trades months before bankruptcy: Report

Harrington also added that an examiner may be able to sift through the plethora of information on the internet that is muddying facts surrounding Celsius, causing its customers to form their own conclusions.

Not every party involved supports the request for an examiner, with the Celsius Official Committee of Unsecured Creditors pointing out the costs of doing so.

Experts that are not directly involved with the case, however — such as Bankruptcy Partner at McCarter & English David Adler — seem to agree that an examiner is warranted.


Celsius changes legal team, pays off $20M in Aave debts

The embattled platform continues to wind down its debts to DeFi lending protocols, having just paid off 20 million USDC to Aave.

Crypto lending platform Celsius has reportedly hired lawyers from Kirkland & Ellis LLP to advise on its restructuring options — the same firm that assisted Voyager Digital with its bankruptcy filing last week. 

According to a report from the Wall Street Journal on Sunday, the company has hired lawyers to advise on options, including a bankruptcy filing in place of the previously hired law firm Akin Gump Strauss Hauer & Feld LLP.

Kirkland & Ellis LLP describes itself as an international law firm that serves clients in private equity, M&A, and other corporate transactions, having been founded in 1909.

The law firm has also been tapped as general bankruptcy counsel for Voyager Digital in its bankruptcy proceedings, which it filed in the Southern District Court of New York on July 5, days after pausing trading, withdrawals and deposits on liquidity issues.

Despite ongoing concerns that the crypto lender may follow a similar path, Celsius has continued to wind down its debts to decentralized finance (DeFi) lending protocols, having just paid off 20 million in USD Coin (USDC) to Aave.

The latest loan repayment was picked up by blockchain analytics firm Peckshield on Sunday, sharing a screenshot of the 20 million USDC transfer from a Celsius wallet to Aave Protocol v2.

DeFi tracking platform Zapper shows that Celsius still owes approximately $130 million in USDC and $82,500 in Ren (REN) to Aave, along with $85.2 million in Dai (DAI) to the Compound protocol, with a total debt of $215 million.

Last week, the lending platform paid off its remaining $41.2 million debt to Maker protocol on Thursday, freeing up more than $500 million in Wrapped Bitcoin (wBTC) collateral.

Related: Tether liquidates Celsius position with ‘no losses’ to stablecoin issuer

Paying down debt has been seen as a positive for Celsius’ depositors, who have not been able to access their crypto funds since withdrawals halted on June 13 and fear a loss of their funds if the company were to go bankrupt.

Last week, crypto lawyer Joni Pirovich told Cointelegraph that Celsius’ repayment of its loan position would ultimately assist its customers, as it would free up capital which could be used to meet customer withdrawal requests.

Pirovich added that even if Celsius files for bankruptcy, repaying its loan position and withdrawing collateral could improve the situation of its customers.