Bitcoin Mining Firms Stuck With $4 Billion In Debt

Key Points:

• The top ten Bitcoin mining debtors owe a total of $2.6 billion.
• A debt-to-equity ratio of 2 or greater is considered dangerous in most businesses, according to Hashrate Index.
• Core Scientific has the largest debt-to-equity ratio of 26.7, followed by Greenidge and Stronghold trail with debt-to-equity ratios of 18 and 11.1, respectively. While Argo also has a risky debt-to-equity ratio of 8.7.

Despite a $72 million relief offer from creditors, Bitcoin miner Core Scientific recently declared bankruptcy, raising concerns about the broader health of the mining ecosystem in the midst of a lengthy bear market. The public miners turn out to owe over $4 billion in liabilities and require quick restructuring to get out of unsustainable debt levels.

During the 2021 boom market, the Bitcoin mining community took out enormous debts, significantly hurting their bottom lines during the ensuing bad market. According to Hashrate Index’s Bitcoin mining data analytics, the top ten BTC mining debtors owe a total of $2.6 billion.

Core Scientific, with $1.3 billion in liabilities on its financial sheet as of September 30th, has filed for Chapter 11 bankruptcy protection in Texas owing to dropping revenue and BTC prices. Marathon is the second-largest debtor, with $851 million in convertible note obligations. Marathon avoids bankruptcy by allowing debt holders to convert their convertible notes to shares.

Most Bitcoin miners, including the third-largest debtor, Greenidge, are undergoing debt restructuring. The debt-to-equity ratio of public bitcoin mining businesses as an industry suggests considerable risk.

A debt-to-equity ratio of 2 or greater is considered dangerous in most businesses, according to Hashrate Index. The graph below depicts some of the most renowned Bitcoin miners’ exceptionally high debt-to-equity ratios.

Core Scientific has the largest debt-to-equity ratio of 26.7, owing to its massive liabilities. Greenidge and Stronghold, two power plant operators turned bitcoin miners, trail with debt-to-equity ratios of 18 and 11.1, respectively. Argo also has a risky debt-to-equity ratio of 8.7.

Given that more than half of the 25 publicly traded bitcoin miners with having debt-to-equity ratios higher than 2 – a level considered risky even in much more stable industries, the mining sector may face restructurings and bankruptcy filings unless the bulls rally.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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