• Bitcoin mining companies have accrued over $4 billion in liabilities in 2022.
• Core Scientific, the largest debtor in the group, has filed for bankruptcy.
• Marathon and Greenidge are undergoing a restructuring process to pay off their debt.
The world of cryptocurrency mining has seen a tumultuous year in 2022, with the top 10 debtors incurring a sizeable debt load of over $4 billion. This has been a result of the bear market that has been prevalent over the past year, which has put a strain on the industry’s financial health. Core Scientific, the largest debtor of the group, appears to be the most affected by the bear market, having filed for Chapter 11 insolvency protection in Texas. Core Scientific has obligations of over $1.3 billion on its income statement as of September 30th, with the majority of these liabilities coming in the form of convertible notes totalling $851 million.
Marathon, the second-largest debtor in the group, has a total of $2.6 billion in liabilities. To avoid bankruptcy, the company has offered to exchange the convertible notes for stock, allowing it to pay off its debt. Similarly, Greenidge, the third-largest debtor, is also undergoing a restructuring process in order to pay off its debt.
The debt-to-equity ratio of the publicly traded Bitcoin mining businesses is concerning, as it suggests a substantial risk for the entire sector. The Combined Debt-to-Equity Ratio currently stands at an all-time high of 0.86, which is significantly higher than the industry average of 0.55. This means that the miners are heavily leveraged, and the inability to pay off their debts could lead to a collapse of the sector.
In light of the current situation, a $72 million rescue package has been offered by creditors in order to help the Bitcoin mining industry get back on its feet. However, there are concerns about the general viability of the Bitcoin trading community, as the debt levels are unsustainable and need to be addressed immediately. It remains to be seen how the industry will fare in the coming months, and whether the miners will be able to pay off their debts in a timely manner.