• Cryptowinter is looming
• More and more miners are getting into trouble
• Iris Energy is threatened with default
Mining companies are currently in a double crisis situation: On the one hand, energy prices are exploding worldwide. The war in Ukraine and the shortage of oil and natural gas associated with the sanctions against Russia are responsible for this. For the energy-intensive crypto miners, this means a huge cost burden. Another stress factor is that the prices of numerous cryptocurrencies have literally collapsed in the current year. For example, Bitcoin, the world’s most popular cyber currency, has lost around 64 percent of its value over the course of the year to date (as of November 20, 2022). There does not seem to be any improvement in the situation in sight, rather many market participants fear a new crypto winter in which prices will continue to fall and not fully recover from it for several years.
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In view of these developments, the operating costs of numerous crypto miners now exceed the profits from the sale of freshly mined tokens. You have to know that new bitcoins are “mined” by solving cryptographic tasks, which in turn are used to generate the data blocks in the blockchain. In the meantime, however, these computing tasks have become so complex that they require huge, expensive server farms. However, due to the fall in prices on the crypto market, some miners are now finding it difficult to pay off the debt they incurred when buying the computers they needed. Among the miners who got into trouble this year are Argo Bockchain and Core Scientific.
Iris Energy in crisis
Now this list is extended by another name: Iris Energy. The fact that the Canadian bitcoin mining centers, which the company mainly operates, use completely renewable energy, apparently didn’t help much. According to the company, Iris Energy currently only has a monthly gross profit of US$2 million, but this is offset by monthly principal and interest payments of US$7 million.
As can be seen from documents from the US Securities and Exchange Commission, Iris Energy is now even threatened with a lawsuit for late payment. The lender, mining equipment maker Bitmain Technologies, has filed a notice of default with the SEC alleging that Iris Energy failed to have “good faith restructuring talks” about multiple principal payments due. These are $32 million and $71 million in equipment financing loans.
However, the loans were not granted directly to Iris Energy, but to two wholly-owned SPVs (Special Purpose Vehicles). As such, the creditor has no access to the assets of Iris Energy or any of its subsidiaries, other than the collateral agreed for the two loans of 1.6 exahash per second (EH/s) and 2.0 EH/s from bitcoin miners, respectively.
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