Cryptocurrency-related lending has become a black smudge for the industry these days and according to a recent report, bitcoin’s low price has put billions in mining loans under stress. Ethan Vera is the co-founder and CEO of Luxor Technologies. He says approximately $4Billion in crypto mining loans are at high risk of default.
Analyst Says Miners ‘Are Nervous About Their Loan Books’
BTC’s price is now 21% higher than it was just two weeks before. This has caused a lot of problems for BTC miners. Bloomberg reports that many loans secured by mining machines have fallen underwater.
Luxor’s Ethan Vera estimates that around $4 billion in loans backed by mining rigs are under stress. “They are nervous about their loan books, especially those with high collateral ratios,” Vera explained to Bloomberg’s David Pan.
Asicminervalue.com stats show that only 14 SHA256 mining rigs can make a profit with current BTC exchange rate. Their electrical costs are around $0.05/kWh. Microbt and Bitmain are the top-selling mining machines, generating between $2.50 to $4.50 daily with an electric cost of $0.05 per kWh.
It is noted that miners have been selling BTC to increase operational costs. Core Scientific Inc. has sold over 2000 BTC since May.
“Bitcoin miners, broadly speaking, are feeling pain,” Luka Jankovic, head of lending at Galaxy Digital detailed in the report. “A lot of operations have become net IRR negative at these levels. Machine values have plummeted and are still in price discovery mode, which is compounded by volatile energy prices and limited supply for rack space,” Jankovic added.
Analyst from JPMorgan says Bitcoin miners continue to put pressure on the price
In bear markets, miners of bitcoin have had to sell their assets, which increases the pressure on the price. Nikolaos Panigirtzoglou from JPMorgan, another analyst said that miners will need to sell bitcoin in order to offset the recent downward pressure that has been affecting BTC market prices.
Panigirtzoglou believes that private-held miners could have sold large amounts of block subsidy to offset operational costs. Multiple reports indicated that BTC was being sold in large amounts by miners starting February 2022.
“Bitcoin miners have been net distributors since the recent sell-off,” the team of onchain analysts at Glassnode detailedOn June 2. “Miners balances have recently declined at a peak rate of 5k to 8k BTC per month ($150M to $240M at $30k BTC).”
A few crypto lenders are also under extreme stress these past weeks and have been facing liquidations. The crypto lender Celsius has been under the crypto community’s scrutiny for alleged liquidations and rumors about restructuring and insolvency.
Loans tied to the BTC mining industry may force miners to sell even more BTC if prices go lower than today’s current exchange rates.
How do you feel about the increased pressure that bitcoin miners face due to the low bitcoin price? Comment below and let us know how you feel about the subject.
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