Bitcoin’s decline is making it more difficult for some miners to repay as much as $4 billion in loans that are backed by their equipment, Bloomberg reported on Friday.
Analysts say an increasing number of loans are underwater, as many of the mining rigs that lenders accepted as collateral have halved in value, along with the price of Bitcoin, the report said. Ethan Vera, co-founder of Seattle-based mining company Luxor Technologies, estimated there was as much as $4 billion in loans backed by machines.
Few miners have defaulted so far, but some have sold Bitcoin reserves, which puts further pressure on prices, according to the report. The cost of equipment may fall even lower if lenders begin to liquidate mining rigs that they repossess.
“Bitcoin miners, broadly speaking, are feeling pain,” Luka Jankovic, head of lending at Galaxy Digital, told Bloomberg. “Machine values have plummeted and are still in price discovery mode, which is compounded by volatile energy prices and limited supply for rack space.”
While some big mining companies are still enjoying decent profit margins, this may not be true for all. Total costs for some miners may already be above $20,000, which is about Bitcoin’s current price, Wilfred Daye, chief executive officer of Securitize Capital, told Bloomberg.