Bitcoin Mining Company returns over 26,000 rigs to bail out of ballooning debt
Bitcoin mining may offer some promises of happiness, but given the unpredictable nature of bitcoin and other cryptocurrencies, the activity can go sideways, forcing even the most well-funded company to resort to desperate measures – like selling equipment to stay afloat.
Stronghold Digital Mining announced Wednesday that it will return over 26,000 bitcoin mining machines to New York Digital Investment Group in exchange for canceling $67.4 million in debt.
Stronghold Digital, a publicly traded bitcoin mining company, reported that it has renegotiated its financing agreements with its lenders to cut more than half of its total debt and related interest and principal payments.
Stronghold Digital has no other option but to let go of some hardware. Image: Blockworks
NYDIG is an industry-leading bitcoin company that helps miners finance machinery and energy infrastructure. SDIG’s move comes as crypto companies scramble to assess the devastating effects of the current market meltdown.
Although Bitcoin (BTC) has briefly retreated to $25,000, it is still down 65% from its November 2021 record high of $69,045. Bitcoin is currently trading at $23,523, down 1.8% over the past week , according to statistics from Coingecko.
No Choice for Bitcoin Mining Firm Stronghold
According to Stronghold Digital, the debt restructuring and refinancing arrangements were required for the company to “remain in business for at least the next twelve months.”
Stronghold delayed the release of its second-quarter financial report by seven days before releasing it this week. The company stated that the delay was due to the negotiation process.
The second quarter earnings report revealed that Stronghold has over $128 million in debt. Consequently, the agreement with NYDIG reduces more than 50 percent of the company’s outstanding debt.
Since the market turmoil at the beginning of this year, Bitcoin mining companies have started selling mined BTC or mining equipment to settle debts or cover operating expenses. In May, for example, when the price of Bitcoin fell below $30,000, miners sold all their production.
A tough June for Bitcoin miners
Based on a survey by Arcane Research, Bitcoin miners sold around 15,000 BTC in June, representing an astonishing 400% of their Bitcoin production. In July, this figure dropped to 6,200 BTC.
However, instead of liquidating its Bitcoin reserves, Stronghold reduced its debt by selling its mining equipment. The firm claims that this will have no long-term implications on Bitcoin production capability.
Meanwhile, following the announcement of the restructuring’s specifics, Stronghold Digital’s share price fell another 6% after the market closed.
The Bitcoin bear market has hit listed miners, sending their shares down an average of over 60% this year.
BTC total market cap at $449 billion on the daily chart | Source: TradingView.com Featured image from Outside Magazine, Chart from TradingView.com
