In the aftermath of the collapse in FTX, crypto lenders were dealt another blow by Bitcoin miners.
When miners could make as much as $4bn (£3.3bn), to finance mining equipment, their profit margins for running the algorithm that runs the Bitcoin blockchain was as high as 90%. This allowed them to purchase more cryptocurrency.
However, the miners are now defaulting on loans and sending back to lenders hundreds of thousands of machines used as collateral, the value of which has dropped as much as 85pc since last November.
#Cryptocurrency exchange @krakenfx has cut a third of its workforce as the chill of the #cryptowinter continues to rock digital coin markets. The US-headquartered exchange said 1,100 people would lose their jobs at the company "in order to adapt to current market conditions". https://t.co/t7SBCwXHRa
— Share_Talk ™ (@Share_Talk) November 30, 2022
New York Digital Investment Group, Celsius Network, BlockFi and Galaxy Digital are among the biggest providers of funding to finance computer equipment and build data centres used to mine Bitcoin.
They have been affected by a liquidity crunch since the value of cryptocurrencies plummeted following the collapse of FTX.
This has left miners unable to take returns due to rising energy costs and increased competition for lower Bitcoin returns.
Ethan Vera is the chief operations officer at Luxur Technologies’ crypto mining services company Luxur Technologies. He stated that “people were pouring money into the mining sector.
“Miners ended up dictating a lot of loan terms, so financiers moved ahead for a lot of deals where only machines were collateral.”
