ASIC financing debt worsened Bitcoin miner’s liabilities in 2022: Report ASIC financing debt worsened Bitcoin miner’s liabilities in 2022: Report
With earnings going from high to low in 2022, some miners struggled to pay the dues, resulting in more defaults, distressed asset sales, and acquisitions than ever before.
2 min read
Updated: Jan. 22, 2023 at 12:15 pm UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
Bitcoin miners faced difficulties paying off debt in 2022, particularly when they had high-interest equipment financing loans, according to a recent report by Hashrate Index.
The report stated.
“We estimate that there is between $2-4 billion worth of ASIC financing debt on private and public miner balance sheets.”
According to the analysis, 6 ASIC financing deals were executed in 2020 worth $47.84 million, while 26 deals worth $662.25 million were completed in 2021.
A growing number of equipment financiers have entered the market since 2020, resulting in an average interest rate of 10.46% in 2022, down from 12.77% in 2020 and 12.82% in 2021.
Consequently, there were more deals in the first half of 2022 – 18 agreements totaling $641.80 million, of which 16 ($576.80 million) were made in the first half.
However, market conditions deteriorated in the second half, resulting in a decrease in ASIC deals. Several miners defaulted on these loans as miners’ revenue declined, and their payments were due in 2022. The study outlined:
Our tally (of known defaults from public miners) puts the total default amount at $227.4 million on the low end and $238.4 million on the high end.
Many of these loans were collateralized with the ASICs themselves, so in the event of default, many of these entities ended up with their financiers.
According to data, BTC mining companies have $4 billion in liabilities, with Core Scientific at the top.
A challenging year for the mining sector
Defaults and bankruptcy shook the mining sector in 2022. In addition to the market condition, miners also had to deal with high electricity costs and record mining difficulty. Due to this, the miner’s daily revenue fell sharply to $16.38 million on Dec. 31, 2022– down from $63.548 million on Nov. 10, 2021.
With the increased debt burden, some mining firms began to sell their assets. This includes Compute North’s 363 asset sale, which saw Compute North’s data centers distributed among its creditors after it filed for bankruptcy. Further, Argo Blockchain sold its Helios mining facility in Texas to Galaxy Digital for $65 million and obtained a $35 million loan.
However, the current situation also presents a chance for those who can invest in assets or increase their margins by innovating. For instance, Germany-based Bitcoin miner Northern Data wants to capitalize on the current market conditions.
Mentioned in this article
Author 
Soumen Datta
Soumen is a dedicated researcher and writer in the field of cryptocurrencies, DeFi, NFTs, and GameFi projects.
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Bitcoin, a decentralized currency that defies the sway of central banks or administrators, transacts electronically, circumventing intermediaries via a peer-to-peer network.
Compute North
Compute North is a bankrupt Bitcoin mining data center operator which filed for Chapter 11 bankruptcy in Texas in September, 2022 with the firm owing as much as $500 million to at least 200 creditors.
Argo Blockchain
Argo Blockchain is a cryptocurrency miner that uses renewable sources of power to support the growth and development of blockchain technologies.
Galaxy Digital
Galaxy (TSX: GLXY) is a digital asset and blockchain leader providing access to the growing digital economy.