A Look into Bitcoin Mining Interest Expenses and Indirect Costs

Several recent news reports have pointed out that bitcoin mining companies may continue to sell their bitcoin reserves and mining equipment, given the declining profitability due to current market conditions. This sell-off pressure has been exacerbated by the fact that many of them took serious levels of leverage during the market rally last year in the form of unsecured convertible notes or loans secured by BTC, ASIC miners or mining infrastructure.

We had already seen companies like Bitfarms having to liquidate half of its BTC reserves that were used as collateral to deleverage its outstanding loan payables to Galaxy Digital when BTC plunged to the loan’s margin call level in June. As we analyzed previously, bitcoin’s ASIC miner marketplace has also taken a hit with spot order values of top-tier equipment declining by more than 50% year-to-date. As a result, many equipment financing deals signed in 2021 or earlier this year likely have become undercollateralized.