Source: THE BLOCK Research
Reason analysis
Bitcoin’s price has fallen from an all-time high of over $69,000 in November 2021 to around $20,500, a loss of nearly 70% in value, combined with fierce competition among miners and rising energy prices, compressing mining profit margins.
The bulk of Core’s loans were used to buy mining machines and build mining farms, and most of them began in the second half of 2021, when Bitcoin prices were rising (peaking at nearly $70,000 in November) and miners were racing to grow their business.
Bull markets always amplify desire and reduce risk control. It has to be said that under the big market in 2021, many people’s mentality is floating, expanding wildly and adding leverage: the overall investment cost of mine construction last year was high, and the average market price may be 250-500,000 US dollars / MW, mergers and acquisitions At the time of mining, the valuation can even reach 1 million US dollars/MW; the unit price of buying mining machines is between 55 - 105 USD/T (the price of S19J Pro falls to less than 20 U/T). Under the double attack, the huge investment in assets in the early stage and the sharp drop in income have made it difficult for many mining companies to continue.
The specific purchase price of Core has not been disclosed, but we can know that it still needs to pay Bitmain cash on a monthly basis. When the cash flow can't keep up, then its default on Bitmain is real. Coupled with the increase in energy and electricity prices in the United States, and the increase in operating costs, even if the original bitcoin is continuously sold to replenish cash, the stock will eventually be exhausted, and there is almost no one in the capital market to replenish blood for mining companies cash out.
Under multiple pressures, the Celsius incident was like the first domino that fell, triggering this series of crises.
Will Core really go bankrupt? We have no way of knowing, but here is a passage from Compass Point for your interpretation:
“With the price of mining rigs falling significantly in 2022, we think there is a good chance that the creditors holding this debt will decide to restructure rather than take the collateral. Nonetheless, without knowing the discussions with Core creditors, we believe it must be taken seriously Treat Core's application for Chapter 11 protection, especially if Bitcoin prices fall further from current levels."
Reference:
https://www.theblock.co/linked/95124/blockcap-us-10000-bitcoin-miners
https://medium.com/blockcap/bitcoin-miners-worth-more-than-150-million-have-just-been-bought-up-by-two-firms-fb90264830ba
https://www.coindesk.com/business/2022/06/29/crypto-miners-face-margin-calls-defaults-as-debt-comes-due-in-bear-market/
https://www.theblock.co/post/180546/massmutual-blockfi-are-among-bitcoin-miner-core-scientifics-biggest-creditors?utm_source=rss&utm_medium=rss
https://www.coindesk.com/business/2022/07/05/core-scientific-sold-over-7k-bitcoins-for-about-167m-in-june-sees-more-sales/
https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2Fe9426556-0acb-4da2-af05-c3c32fec85d9_900x500.jpeg
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