Bear Market Picu Bankrupt Bankrupt Bitcoin Mining Company, Here's An Explanation

Bitcoin mine, Core Scientific, faces bankruptcy. (photo: Twitter @Core_Scientific)

JAKARTA - Bitcoin Core Scientific mining company, recently filed for bankruptcy. The choice was taken despite an offer of assistance of 72 million US dollars (Rp 1.1 trillion) from creditors, which raised questions about the health of the entire Bitcoin mining community in the middle of a prolonged bear market.

As it turns out, public Bitcoin miners currently owe more than USD 4 billion (IDR 62.4 trillion) in liability and required immediate restructuring to get out of unsustainable high debt levels.

Bitcoin's mining community took massive loans during the bull market in 2021, which had a negative impact on their profits during the next bear market. Bitcoin mining data analytics by the Hashrate Index show that only the top 10 Bitcoin mining debtors are cumulatively in debt of more than USD 2.6 billion (IDR 40.5 trillion).

Core Scientific, the largest debtor among others, with an obligation of US$1.3 billion (Rp 20.2 trillion) in the balance sheet as of September 30, recently filed for bankruptcy protection Chapter 11 in Texas due to lower revenue and price of BTC.

Marathon, the second largest debtor, has USD 851 million (IDR 13.2 trillion) in the form of convertable wesel liabilities. As a result, Marathon prevented bankruptcy by allowing debt holders to convert banknotes into shares.

Most Bitcoin miners, including third-largest debtor, Greenidge, are undergoing a restructuring process to reduce debt. As an industry, the debt-to-equity ratio of public Bitcoin mining companies expresses high risks.

As the Hashrate Index shows, the debt-to-equity ratio of two or higher is considered risky in most industries.

Considering that more than half of the 25 public Bitcoin miners boast of a very high debt-to-equity ratio, the mining sector may find potential restructuring and bankruptcy filing unless there is a bull market suddenly in 2023.

While some mining companies may close or slow operations to reduce liability, it will help miners continue to expand their footprint as they buy competing equipment and facilities.

On December 20, Greenidge signed a debt restructuring agreement worth USD 74 million (IDR 1.1 trillion) with NYDIG, a fintech company dedicated to Bitcoin.

As Cointelegraph reports, the NYDIG agreement will see mining purchases with a mining capacity of around 2.8 exahash per second (EH/s). Instead, mining companies will get a debt reduction of 57 million to 68 million US dollars.