Key Points:
- BlockFi plans to sell about $160 million of loans backed by around 68,000 Bitcoin mining machines.
- The bidding process began last year, with a bid submission deadline of January 24.
According to Bloomberg News, citing two people familiar with the matter, the bankrupt encryption lender BlockFi is seeking to sell $160 million in loans, which are supported by about 68,000 Bitcoin mining machines.
The bidding process began last year, with the deadline for submission of bids being January 24. Some of those loans have defaulted, the people said. Given the drop in mining machine prices, some loans may be undercollateralized. Mining machine prices have fallen more than 80% in the past year as falling Bitcoin and soaring electricity costs squeeze mining profits.
The persons stated that the Jersey City, New Jersey-based company began the loan bidding process last year before seeking protection from creditors in November. According to the sources, some of the loans have already fallen behind and looked to be undercollateralized, considering the current costs of Bitcoin mining equipment.
Through loans secured by the computer rigs, BlockFi was a significant funder for Bitcoin miners, who have been severely harmed by low Bitcoin prices and rising power expenses.
A number of lenders of digital assets, including exchange FTX, hedge fund Three Arrows Capital, and stablecoin project Terra Luna, have declared bankruptcy in recent months. BlockFi is one of them.
Since the previous bull run in the cryptocurrency market, around $4 billion has been generated through such loans. New York Digital Investment Group, Celsius Network, Galaxy Digital, and Digital Currency Group’s Foundry are among the more significant financiers of cryptocurrency mining businesses.
Due to the extreme volatility of Bitcoin values, traditional lenders avoided lending to Bitcoin mining firms; however, crypto-native lenders filled that gap.
As Coincu reported, Bitcoin miner Bitfarms may have stopped paying installment payments on a loan from BlockFi already or may do so in the future, thus defaulting on the loan. Bitfarms is attempting to restructure the loan as a result.
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Harold
Coincu News
