Some miners are finding it harder to repay loans backed by equipment that they have taken out due to Bitcoin’s declining value, Bloomberg reported Friday.
Analysts believe that a growing number of loans is underwater as the value of many mining rigs used as collateral by lenders has decreased along with Bitcoin’s price. Ethan Vera, the co-founder and CEO of Luxor Technologies in Seattle, estimates that there are as many as $4 billion worth of loans that are backed by machines.
Although few miners have defaulted, some have sold Bitcoin reserves which has put further pressure on the prices. Lenders may liquidate repossessed mining equipment to lower the cost of equipment.
Bloomberg reports that Bitcoin miners are, in general, feeling pain. Luka Jankovic is the head of lending at Galaxy Digital. “Machine prices have dropped and are still in price discovery mode. This is compounded with volatile energy prices and limited availability for rack space.”
Although some large mining companies still enjoy decent profit margins this could not be true for everyone. According to Wilfred Daye (chief executive officer at Securitize Capital), some miners’ total costs may be higher than $20,000, which would roughly reflect Bitcoin’s current price.
