ASIC financing debt worsened Bitcoin miner’s liabilities in 2022: Report

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.