Bloomberg analysts: miners cannot repay loans worth $4 billion
The risk of non-payment on loans is growing, as the value of cryptocurrency mining rigs accepted as collateral has halved
25.06.2022 - 06:40
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What’s new? Some mining companies have started to struggle to repay loans totaling around $4 billion. This could create a potential risk for large crypto lenders, Bloomberg reports. The reason, according to analysts, was a prolonged downturn in the bitcoin rate. The number of loans at risk of non-payment is growing, as the value of many cryptocurrency mining rigs accepted by lenders as collateral has halved.
Information on the Bloomberg website
What else do analysts say? Several companies have already defaulted on their loans, but the recent BTC sales are showing “signs of distress.” In May, Core Scientific sold more than 2000 bitcoins to cover operational costs. On June 21, Bitfarms sold nearly half of the coins it mined to repay part of its $100 million loan it took out from Galaxy Digital. If the market situation does not improve, it could lead to “an ugly scenario,” according to Bloomberg.
According to analytics firm Arcane Research, in May, mining companies sold 100% of their mined coins, as well as part of the reserves, while in the first four months of 2022 they sold between 20% and 40% of the mined BTC. According to analysts, the reason for this increase in sales was a sharp decline in mining profitability, it fell by 80% since November 2021. In may, miners transferred a total of 195 663 BTC to cryptocurrency exchanges, which is the biggest monthly flow since January 2022.
The sale of bitcoin reserves puts further pressure on prices, and equipment values may fall even lower if lenders looking to recoup their losses start selling mining devices. Crypto lenders such as Galaxy Digital, NYDIG, BlockFi, Celsius Network, Foundry Networks, and Babel Finance have started accepting equipment as collateral in addition to cash contributions.
As of June 25, 06:40 UCT, bitcoin is trading at $21 280, having added 1,88% in price per day, according to cryptocurrency exchange Binance.
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