Crypto Miner Consolidation Imminent as Some Industry Players Struggle

As more miners report dire financial pressures tied to low crypto prices, high energy costs and debt, a pickup in consolidation is inevitable, industry watchers said. 

After Core Scientific revealed in filings last week it was considering bankruptcy, Argo Blockchain became the latest large bitcoin miner to reveal financial pressures, saying an expected capital injection of $27 million had fallen through. 

A company spokesperson declined to comment.

As small to midsize firms struggle, larger mining rig operators have expressed interest in buying opportunities. Among the possible acquirers is Marathon Digital, which previously said it was more focused on building organically than buying.

“We like having an agile strategy…and the capitalization to be able to take advantage of opportunities like this,” Marathon Digital CEO Fred Thiel told Blockworks.

Thiel declined to comment on whether the firm has engaged with Core Scientific or Argo, but he said Marathon would keep an eye on cheap hosting assets.

“Would Marathon participate, possibly, in purchasing a hosting site?” Thiel said. “Yeah, if the price is absolutely attractive. Or if it made strategic sense.”

Argo Blockchain the latest miner under stress

Argo Blockchain said Monday it no longer expects to receive the $27 million capital influx it had expected from a “strategic” investor, which it declined to name. The capital was set to be used in part for capital expenditures for its continued build-out of its flagship Helios facility in Dickens County, Texas. It’s not clear why the funding fell through. 

As Argo Blockchain explores other financing opportunities, the company sold nearly 4,000 new Bitmain S19J Pro machines to raise $5.6 million.

“Should Argo be unsuccessful in completing any further financing, Argo would become cashflow negative in the near term and would need to curtail or cease operations,” the company said.

NYDIG agreed in May to loan Argo up to $70.6 million to recapitalize the purchase of digital asset mining equipment for the Texas facility. It is not clear whether NYDIG was set to supply the additional $27 million. 

A NYDIG spokesperson did not immediately return a request for comment. 

The move comes after Core Scientific said in filings last week it would be skipping upcoming payments as it faces liquidity and operational issues. The miner said it hired advisers as it considers its options, including seeking relief through bankruptcy.

Crypto mining data center operator Compute North filed for bankruptcy in Texas in September. The firm owes as much as $500 million to a minimum of 200 creditors, according to a petition filed in the US Southern District of Texas bankruptcy court.

Will miners survive the ‘perfect storm’ of pressures?

Chase White, an analyst at Compass Research & Trading, said in a research note published Tuesday that the firm has lowered its price target for Argo from $4.50 to $1.

The stock price was $0.90 at 3:00 pm ET on Tuesday, plummeting about 93% year to date and down 19% on the day.

“We believe [Argo] probably has enough liquidity to stay afloat for the next couple of quarters,” White said. “Part of the reason we thought [Argo] was raising share capital was to have enough cash to enter into a fixed price power purchase agreement (PPA) for its [Texas] facility to rein in power costs, which now seems to be off the table.”

Glyn Jones, CEO of Icebreaker Finance, said too much of the industry focused exclusively on debt-fuelled growth in 2020 and 2021 — while paying less attention to the cost of production.

Icebreaker in September launched a lending pool for miners he called “vertically integrated and positioned for success.” The loans, with interest rates between 15% and 20%, carry a term of 12 to 18 months and are collateralized by assets such as mining rigs, power transformers and digital assets.

“We estimate that less than 25% of US hashrate is operating with the financial resilience necessary to weather the full range of credible scenarios including a further deterioration in hash price,” Jones told Blockworks. “More so than perhaps any other industry, its economics dictate that only the most efficient operators will survive in the long run. No miner has greater pricing power, so it is all about cost of production.”

Increasing bitcoin mining difficulty and associated costs — as well as looming debt — have created “a perfect storm” for many miners, Thiel said. He added that about 20 or so public miners could be at risk of going bankrupt due to current market conditions.

“If you were to look across the industry and [see] who has equipment financing, those are the ones with the highest risk today,” Thiel said. “Or those who have a lot of debt service to make.”

Healthier miners seek buying opportunities

Bill Cannon, head of portfolio management for digital asset fund manager Valkyrie Investments, said the mining space’s stronger firms are likely to bolster their positioning through cut-rate acquisitions.

Cannon expects mergers and acquisitions to pick up this quarter and early next year as companies on the verge of insolvency jostle to retain at least some shareholder value — and keep their doors open. 

“Consolidation is inevitable,” Cannon said. “All industries go through it, and we believe that the remaining miners will benefit from this period, similarly to how the Amazons and Googles of the world did after they emerged from the ashes of the dot-com boom.”

Riot Blockchain CEO Jason Les told Blockworks his firm was one of the “best-positioned acquirers” in the sector. A number of companies, Les added, will go bankrupt or tap private markets and associated leveraged-buyouts.

Those considering bankruptcy might want to go that route sooner rather than later, Thiel said.  

“If you’re near the risk of doing it, you’d better hurry up,” he said. “Buyers for your assets are going to run out of money, because there are so many people ahead of you in line that are in bankruptcy.”


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  • Ben Strack is a Denver-based reporter covering macro and crypto-native funds, financial advisors, structured products, and the integration of digital assets and decentralized finance (DeFi) into traditional finance. Prior to joining Blockworks, he covered the asset management industry for Fund Intelligence and was a reporter and editor for various local newspapers on Long Island. He graduated from the University of Maryland with a degree in journalism.

    Contact Ben via email at [email protected]

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