For a time now, bitcoin miners have been stuck in a rut. The cash flow and mining income were unintentionally impacted when the value of the digital asset decreased. As a result, many miners were forced to sell off their Bitcoin holdings in order to survive. Public mine workers are not excluded from this. Public miners are steadily approaching a liquidity crunch as payments become due and the miners earn less money owing to market pricing.
Inability to Pay
When the price of bitcoin had been in an ongoing bull market in 2021, several public miners had generated substantial gains.
Expectedly, promises had been made taking into account the state of the market at the time. The expectations for these public miners have all but been destroyed by price drops, though, and the market has other ideas.
Following their pledges to increase their BTC production, miners invested in more hardware as adoption and activity on the bitcoin network grew. Like many businesses, a significant part of these devices had been purchased on credit and required payments. Forecasts indicate that a significant number of the public bitcoin miners would find it difficult to make these payments if the value of the digital asset continues to decline.
It is now necessary to carry out these significant expansion plans that were set during the bull market during a bad market. Machine purchases made by certain public miners reached the hundreds of millions of dollars. Marathon, Riot, Core, and Hut 8 are a some of the public miners with significant machine orders. Due to their intention to boost its hashrate by more than 600 percent, Marathon alone has $260 million in machine payments scheduled for 2022.
Need To Pay In Bitcoin?
Many publicly traded bitcoin mining businesses are still liable for the purchases they made during the bull market.
This means that they must find a way to pay off these devices whether the price of bitcoin is higher or lower. They might accomplish this in a variety of ways.
Public mining firms may get the debt necessary to cover the cost of this equipment without having to sell all of the bitcoins they have on hand, which would effectively bankrupt the businesses. However, given the limited period, these obligations would need to have a higher interest rate.
Given the status of the cryptocurrency market, another option would be to issue stock at a reduced valuation. something that businesses are hesitant to undertake. Additionally, they can opt to sell the equipment that have already been ordered to rivals who have more cash on hand.
The firms defaulting on the orders that have already been placed, which is more likely in these circumstances, would be the last but not least possibility. As a result, the price of bitcoin mining equipment would decrease as more rigs entered the open market.