After hitting crypto lending platforms hard, the devaluation of bitcoin may impact mining activity. In total, mining companies owe US$4 billion in loans.
The drop in the price of bitcoin may be challenging for miners. While most loans are current, the mining market may face difficulties keeping up with these payments.
The company Core Scientific Inc., for example, sold 2 thousand bitcoins two months ago to keep the business going. The difficulty in balancing cash flow has also hit Bitfarms Ltd.
Recently, the company sold bitcoins to pay off a US$100 million loan. According to analysts, the sale of crypto assets by mining companies tends to affect the price of bitcoin.
Before the devaluation of the crypto asset, mining companies had up to a 90 % profit margin on the activity. The cofounder of mining company Luxor Technologies, Ethan Vera, said that these companies have US$4 billion in loans on the market.
In addition to crypto assets, mining companies use equipment as collateral for loans. However, with bitcoin’s decline, even the platforms may be used as collateral.
Currently, the effective cost of mining one bitcoin is around US$ 8,000. However, this cost can vary depending on the equipment used and the electricity.
The CEO of Securitize Capital, Wilfred Daye, states that this cost can be raised to US$ 20,000. In this case, he cites that the increase may be due to loans taken out by mining companies and the expenditure on new equipment in recent months.