It has been reported by Bloomberg that bankrupt cryptocurrency lender BlockFi Inc. is planning to sell about $160 million worth of its loans backed by about 68,000 Bitcoin mining machines as part of its bankruptcy.
Recovery Plans
In November, the New Jersey-based company, which filed for bankruptcy protection, started in earnest the process of bidding for the loans, according to the people who are familiar with the matter. In addition to the loans defaulting, there are also loans that appear to be undercollateralized as the current price of Bitcoin mining equipment appears to be below normal.
There have been numerous digital-asset lenders in the past year who have filed for bankruptcy due to the collapse of major crypto firms FTX and Three Arrows Capital as well as stablecoin project Terra Luna, among others. BlockFi is one of those lenders. Through loans backed by the computer rigs, the lender served as a major financier for bitcoin miners, which have been reeling from low BTC prices and soaring electricity costs.
Due to the high volatility of Bitcoin prices, traditional lenders stayed away from mining companies, however, crypto-native lenders filled the void created by their absence. In the last bull run in the crypto market, almost $4 billion was raised through loans of this type. New York Digital Investment Group, Celsius Network, Galaxy Digital, and Digital Currency Group’s Foundry are some of the other major lenders for crypto mining companies.
Bitdeer, the crypto mining company backed by Chinese billionaire Jihan Wu, has created a $250 million distressed investment fund. Meanwhile, Grayscale, the largest digital asset manager, has opened a subsidiary to invest in Bitcoin mining hardware together with its sister company Foundry to take advantage of the distressed mining market.
Cryptocurrency companies have been facing some challenges recently, from exchanges to mining companies and lenders, which might worry some users. In spite of this, market history and the trend of the market show that companies in this market are always faced with crises. Almost every industry can be faced with such challenges from time to time.
After all, the market is finding its way and there are even signs of a recovery in the price charts, which is good news. Investing news is more likely to be seen as a green candle on a chart than news concerning bankruptcy.
