Cryptominers unable to repay millions in loans are handing over their mining rigs instead

midian182

Posts: 8,495   +105
Staff member
In brief: The crypto winter is hitting every person and organization involved in the industry. It's proving to be an especially challenging time for crypto lenders, who are faced with miners unable to pay back the millions of dollars they borrowed so are returning the mining rigs they put up as collateral instead.

Bloomberg reports that during the height of the crypto boom, when Bitcoin was near $69,000 and profit margins were as high as 90%, miners raised as much as $4 billion from mining-equipment financing. Companies were handing out massive loans for rigs and to build mining farms, but as Ethan Vera, chief operations officer at crypto-mining services firm Luxor Technologies, notes, "Miners ended up dictating a lot of the loan terms, so the financiers moved ahead with a lot of the deals where only the machines were collateral."

But things have been on a downward trajectory since then. Following the collapse of TerraUSD and the implosion of FTX, businesses are laying off staff, and Bitcoin is down to around $16,800 at the time of writing. There's also the energy crisis and Ethereum's move from proof-of-work to proof-of-stake.

The market collapse has led to many companies defaulting on their loans. Iris Energy Ltd. said it expects it will be unable to pay back a $108 million loan that it owes the New York Digital Investment Group, most of which is secured against mining rigs. BlockFi, which has already declared bankruptcy, owes the same lender $54 million, while Core Scientific Inc., which has warned of potential bankruptcy, owes it $39 million.

Some firms, including Stronghold Digital Mining, have returned tens of thousands of mining rigs to reduce their debts. The problem for the lenders is that these machines have seen their value decrease by as much as 85% since last November.

This could be the tip of the iceberg. About 75% of the computing power for the entire Bitcoin network comes from private companies that don't have to disclose their rig-backed loans, so more defaults are expected.

Some organizations have decided to stop paying the loans even though they're still able to afford it, as the collateral (I.e., the rigs) can be worth less now than the remaining payments. "It could be an economic decision to walk away from the financing deals," said Vera. "Miners are focused on how to survive the next six months rather than if they need the lender for the next five years."

This week also brought a warning that crypto firms weren't taking seriously the possibility of Bitcoin dropping to $5,000 next year, a price it hasn't seen since early 2020.

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winjer

Posts: 509   +2,325
That is just priceless.

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silversea

Posts: 55   +96
I have been saying for a very long time that Cryto Currencies of any kind are a scam and should have been done away with a long time ago, I have never in my life been happier to see anything on the verge of extinction then I am about Cryto Currency good riddance.
 

wiyosaya

Posts: 8,431   +7,877
Lenders handed out loans to these clowns? :rolleyes: The lenders are getting what they deserve - a bunch of devalued hardware not worth the initial rated value of the hardware used to "secure" the loans. Greed runs deep in the modern world. I bet there will be a large number of "loan officers" forced to seek employment elsewhere.
 

Hooda Thunkett

Posts: 22   +30
Buy the dip lol, buy the dip ;D
really, I'm glad this scam is slowly over. It wont go fully away as there is no better way to make money laundry, but at least it wont affect electronic market anymore.
Should we call the ones buying the dip "Dips" or "Dippers"?
 

hazphan

Posts: 14   +25
I knew renaming the Staples center to "Crypto.com Arena" was a bad idea.... Heck anyone that graduated elementary school would have known that. Come on Los Angeles..... At least Staples still makes some money!
 

Theinsanegamer

Posts: 3,959   +7,014
The sooner crypto.com and tether go under, the better. Some men just want to watch the (crypto) world burn.
I was told after ETH went PoS we would get an influx of dirt-cheap used GPUs. I haven't seen any so far. I don't know what there is to gain from writing these stories when they don't reflect reality.
There was though. There's a reason the 6900xt was going for under $700.

The problem is they all got bought up by scalpers, which in turn is resulting in them now having issues selling them for more then what they paid.
Crypto should have been a 1:1 but speculators thought otherwise and so....the story continues, no sympathy here.
Crypto's value isnt what's causing issues here, its one company after another betting on crypto values with 0 realistic liquid collateral to back it up.
 

WhiteLeaff

Posts: 92   +125
Whenever there is any sudden fall or scandal, this story comes with pointing out crises and instilling fear. But, stock of several tech companies had drops equal % to or greater than those of BTC, like it or not, it is a natural effect of rising interest rates around the globe suffocating high-risk investments.
 

wiyosaya

Posts: 8,431   +7,877
Whenever there is any sudden fall or scandal, this story comes with pointing out crises and instilling fear. But, stock of several tech companies had drops equal % to or greater than those of BTC, like it or not, it is a natural effect of rising interest rates around the globe suffocating high-risk investments.
Personally, I think the thing suffocating high-risk investments is high-risk.:neutral:
 

Dimitrios

Posts: 1,102   +912
Will their be thousands of mini documentaries of miners trying to win pitty and might start a GOFUNDME? Someone grab the popcorn............. I mean bread. Tears will taste good.