Crypto Lenders’ Woes Worsen as Bitcoin Miners Struggle to Repay Debt

tech.hindustantimes.com:

Beleaguered crypto lenders are being dealt another blow from Bitcoin miners as they weather the aftermath of the FTX collapse.

Miners, who raised as much as $4 billion from mining-equipment financing when profit margins were as high as 90%, are defaulting on loans and sending hundreds of thousands of machines that served as collateral back to lenders. New York Digital Investment Group, Celsius Network, BlockFi Inc., Galaxy Digital, and the Foundry unit of Digital Currency Group were among the biggest providers of funding to finance computer equipment and build data centers.

The liquidity crunch hitting digital-asset markets after FTX failed comes as low Bitcoin prices, soaring energy costs and more competition weigh on miners. Loans backed by the computer equipment, known as rigs, had become one of the industry's most popular financing tools. Many lenders are now likely facing substantial losses since they can't seize any other assets besides the machines, whose value has dropped by as much as 85% since last November.

“People were pouring dollars into the mining space,” said Ethan Vera, chief operations officer at crypto-mining services firm Luxor Technologies. “Miners ended up dictating a lot of the loan terms, so the financiers moved ahead with a lot of the deals where only the machines were collateral.”

Iris Energy Ltd. said this month it expected to default on $108 million of limited recourse loans, which is mostly backed by mining rigs. The publicly-traded miner is a long-time borrower of NYDIG, winning a $71 million loan secured by 19,800 rigs as recently as March. That was the miner's third facility secured by NYDIG, a unit of Stone Ridge Holdings Group. Core Scientific Inc., which has warned of bankruptcy,