-Crypto lender BlockFi has filed for bankruptcy and is planning to sell $160 million of Bitcoin (BTC) miner-backed loans.
-The loans are collateralized by approximately 68,000 BTC mining machines.
-The price of BTC miners fell by around 85% over the past year due to the fall in BTC price in 2022 and the rising cost of power.
Crypto lender BlockFi has recently filed for bankruptcy, and is now planning to sell $160 million of Bitcoin (BTC) miner-backed loans. These loans are collateralized by approximately 68,000 BTC mining machines which have seen their value decline drastically in the past year. In fact, the price of BTC miners fell by around 85%, as the fall in BTC price in 2022 and the rising cost of power have severely impacted the demand for these machines.
The collapse of FTX, one of the biggest players in the crypto mining sector, has further amplified the woes of BlockFi, which has been providing loans to miners in the past year. This has resulted in some loans defaulting and some becoming under-collateralized. Consequently, in order to recoup its losses, BlockFi is now looking to sell these miner-backed loans, which is worth around $160 million.
Another major player in the mining sector, Core Scientific, has also filed for Chapter 11 bankruptcy in December 2022, while Argo Blockchain sold its Texas mining facility to Galaxy Digital for $65 million — securing a $35 million loan from the firm in late December 2022.
With miners unable to pay off their loans, and with the crypto market still volatile and uncertain, it remains to be seen how BlockFi will manage to recover from this crisis. It is likely that the lender will have to restructure its loans to reflect the current market price of BTC miners. However, as the crypto market continues to mature, it is expected that more players will enter the market and help create a more stable and viable industry.