In this cycle, the losses of Bitcoin miners will be more common – Hut8 CEO
According to Hut 8 CEO Asher Gunot, there will be far fewer Bitcoin (BTC) mining companies filing for bankruptcy in the coming years than in 2022.
Speaking in an interview with Bloomberg on April 3, Gennot said the main cause of bankruptcy in 2022 is that companies are over-leveraged and unprepared to increase energy costs.
“Most of the losses in the mining sector are due to large positions and distressed assets due to the benefit of 2021,” Gennot said.
“A lot of companies have grown up with that, and the debt can't be serviced in 2022 when the price of bitcoin drops and the price of energy goes up.”
Compute North, Celsius Mining and Core Scientific — which has since been listed on the Nasdaq — are among several bitcoin miners that have filed for bankruptcy in the crypto winter of 2022.
However, Jeannott said since then, bitcoin miners have relied on small profits from equity markets and large amounts of debt-free capital to grow their businesses.
He expects to see merger and acquisition (M&A) activity among smaller bitcoin miners, which he predicts will contribute to an extremely low loss rate.
Bitcoin would need to return to $30,000 or $40,000 to open up for a significant amount of M&A activity, or “stress opportunities,” according to Genoot.
Bitcoin halving is scheduled for April 20 when block 840,000 is reached. The event will reduce mining rewards from 6.25 BTC ($412,000) to 3.125 BTC ($211,000) at current prices.
Gennot added that investors will flock to the “big operators with the lowest marginal cost of production” because of the halving.
Hut's CEO said he took a similar step last December when he formed US Bitcoin Corp (USBTC) and merged it with Hut 8 Mining Corp's operations.
The merger is now registered as Hut 8 Corp in Miami, Florida, which buys more than 9,100 Bitcoin, with $600 million on its balance sheet.
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Bitcoin is currently trading at $66,000, with the halving event now 17 days away.
Historically, Bitcoin has set new all-time highs after halving within 6-12 months, occurring three consecutive times in 2012, 2016 and 2020.
Bitcoin has bucked this trend in recent weeks, surpassing its previous all-time high of $68,990 on March 5, just 46 days after its halving.
Many industry analysts see the recently launched position of Bitcoin exchange-traded funds in the United States as a major contributor to Bitcoin's excessive and unusual price action in recent months.
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