Sebastian Sinclair

US bitcoin mining firm Greenridge has entered a non-binding agreement to settle a $74 million debt with NYDIG as concerns mount over its financial longevity.



The firm, which <a href="https://greenidge.com/environmental-stewardship/" target="_blank" rel="noreferrer noopener">controls</a> its own power plant in upstate New York, plans to offload a significant portion of its mining equipment to NYDIG, a crypto-focused financial services unit, according to a <a href="https://www.prnewswire.com/news-releases/greenidge-generation-executes-term-sheet-with-secured-lender-nydig-regarding-debt-renegotiations-provides-liquidity-update-301706932.html" target="_blank" rel="noreferrer noopener">statement</a> on Tuesday.&nbsp;



Selling the rigs to NYDIG would reduce Greenidge’s debt by between $57 to $68 million — representing up to 90% of its loan. Under the terms of the deal, the Nasdaq-listed miner would continue to host the machines at its facility in South Carolina.



To secure the remaining loan balance, Greenridge plans to pledge all of its unencumbered assets to the New York-based provider.&nbsp;



For the months of October and November, Greenridge burned through $8 million in cash where roughly $5.5 million has been diverted to NYDIG to pay principal and interest payments.



“If we complete this debt restructuring, this would improve our future liquidity and would provide a significant step toward the improvement of our balance sheet,” Dave Anderson, Chief Executive Officer of Greenidge, said in the statement.



Greenidge may also transfer credits, coupons and additional assets to NYDIG, including bitcoin mining infrastructure accrued under its non-fixed price purchase contracts with Chinese rig manufacturer Bitmain.&nbsp;



Greenridge plans to sell rigs with total hashrate capacity of 2.8 EH/s, while retaining ownership of miners that can output 1.2 EH/s.



Greenridge’s stock fell 18% on the day to $0.30, now down more than 98% year-to-date. The firm’s share price fell an additional 3.7% in pre-market trade Wednesday.



It’s not just Greenidge feeling the heat. Rising electricity costs and a reduction in bitcoin prices recently forced London-based miner Argo Blockchain to plan <a href="https://blockworks.co/news/argo-bankruptcy-still-on-the-table" target="_blank" rel="noreferrer noopener">selling hardware</a> to prevent bankruptcy The firm failed to secure a $27 million <a href="https://blockworks.co/news/crypto-miner-consolidation-imminent-as-some-industry-players-struggle" target="_blank" rel="noreferrer noopener">capital injection</a> last month.



Not to mention, major miner Core Scientific just <a href="https://blockworks.co/news/bitcoin-miner-core-scientific-to-file-bankruptcy-stock-tanks-30" target="_blank" rel="noreferrer noopener">filed for bankruptcy</a> after struggling under the weight of its own loans.



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Bitcoin Miner To Sell Rigs Worth $60M To Cover NYDIG Debt

David Canellis

Bitcoin miners are facing a tough few weeks ahead as meager prices threaten to render the network service unfeasible for anyone but the largest operators.



After shedding a quarter of its value throughout the FTX saga, the price of bitcoin is hovering around $16,300, down 66% year to date. Electricity prices —- which directly impact bitcoin mining profitability — in the US have jumped by about 13% in that time.



Bitcoin fading as electricity rates spike is obviously bad for miners: It can turn bitcoin mining into a loser’s game. One calculator offered by <a href="https://insights.braiins.com/en/cost-to-mine" target="_blank" rel="noreferrer noopener">Braiins</a> shows the cost of producing 1 BTC with a top-of-the-line Bitmain Antminer S19j is currently $34,732 — more than double bitcoin’s price.&nbsp;



And that’s based on electricity prices at $0.06 per kilowatt hour; the US Bureau of Labor Statistics <a href="https://www.bls.gov/regions/midwest/data/averageenergyprices_selectedareas_table.htm" target="_blank" rel="noreferrer noopener">reported</a> a national average at $0.166 last month. Data visualization portal <a href="https://en.macromicro.me/charts/29435/bitcoin-production-total-cost" target="_blank" rel="noreferrer noopener">MacroMicro</a> shows a lower global average cost, around $22,300, still 37% above bitcoin’s current price.&nbsp;



Although, some large scale mining operations are vertically integrated. Firms like Greenidge control their own power sources, which makes the whole process significantly cheaper.&nbsp;



Still, margins are thin across the board; one indicator built by investment unit Capriole <a href="https://twitter.com/caprioleio/status/1594671729917714437" target="_blank" rel="noreferrer noopener">measures</a> the ratio of bitcoin sold from miner reserves to their overall balance — it has jumped 500% in the past month, now at its highest reading in years.



“Higher equals more selling. We also sum the miner output over 30 days and compare it to average miner reserves held over the last 30 days, we think it highlights high miner selling very well,” Charles Edwards, founder at Capriole, told Blockworks.



Bitcoin miners have indeed been selling regularly, but the total sum of their treasuries has more-or-less held steady this year. In fact, miners together hold 8,184 more bitcoins than at the start of 2022, per CryptoQuant.



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="988" height="546" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/11/bitcoin-miner-reserve-cryptoquant.jpg" alt="" class="wp-image-39902" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/11/bitcoin-miner-reserve-cryptoquant.jpg?w=988 988w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/bitcoin-miner-reserve-cryptoquant.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/bitcoin-miner-reserve-cryptoquant.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/bitcoin-miner-reserve-cryptoquant.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/bitcoin-miner-reserve-cryptoquant.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/bitcoin-miner-reserve-cryptoquant.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/bitcoin-miner-reserve-cryptoquant.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/11/bitcoin-miner-reserve-cryptoquant.jpg?w=50 50w" sizes="(max-width: 988px) 100vw, 988px" /><figcaption>Source: <a href="https://cryptoquant.com/" target="_blank" rel="noreferrer noopener">CryptoQuant</a></figcaption></figure>



Capriole’s indicator may be picking up a round of dumps, just as crypto reckoned with the impending collapse of FTX and its ensuing contagion. Bitcoin miners collectively sold 4,502 BTC between Nov. 7 and Nov. 8, according to CryptoQuant, a haul potentially worth up to $93 million.



Bitcoin’s price collapsed 24% around the same, dropping from $20,600 to under $15,800. Measuring miners’ direct impact on that move is difficult, but it’s clear that capital preservation is front-of-mind.



Bitcoin miners still hold more than 1.85 million BTC worth about $30.5 billion, representing almost 10% of the supply.&nbsp;



Loans backed by bitcoin miners to buy more bitcoin miners



Another spanner: A raft of major operators took out <a href="https://blockworks.co/news/crashing-prices-expose-bitcoin-mining-industrys-addiction-to-leverage" target="_blank" rel="noreferrer noopener">high-interest loans</a> — in many cases backed by mining rig inventories — at the peak of the bull market last year. Sky-high prices made it en vogue to acquire as many mining rigs as possible, as quickly as possible.&nbsp;



Those inventories have since been delivered and are now mining away in hopes of actually paying for them — giving us the unusual mix of record high hashrate and crumpled prices.&nbsp;



Indeed, Bitcoin’s current thunderous hashrate is fueled by a fiscal need to generate revenue as soon as possible to pay back decisions made more than one year ago. This has driven mining difficulty (which impacts the odds of successfully mining bitcoin) through the roof while vaporizing operational margins.



Bitcoin miners have faced the grim reality of paying back those loans in a bear market for months now. Core Scientific, one of the largest miners in the industry by hashrate, <a href="https://www.cnbc.com/2022/10/27/bitcoin-miner-core-scientific-warns-it-might-go-bankrupt-stock-plunges.html" target="_blank" rel="noreferrer noopener">warned the SEC</a> last month that it would not be able to meet its loan obligations and could go bankrupt.



Core Scientific is now selling more bitcoin than it creates to stay afloat, having cashed in most of its bitcoin stash over the past few months. The firm has reported $435 million lost in the year’s third quarter, bringing its year-to-date damage to $1.7 billion​​ and share prices losses to 98%.



Iris Energy, a smaller but sizable operation, <a href="https://www.sec.gov/Archives/edgar/data/1878848/000114036122042419/ny20005141x6_6k.htm" target="_blank" rel="noreferrer noopener">disclosed</a> default on loans worth $108 million this week. The firm has switched off mining rigs it used as collateral for expansion loans, similarly on the brink of bankruptcy.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" src="https://flo.uri.sh/visualisation/11930341/embed#?secret=42JEnL4ykK" data-secret="42JEnL4ykK" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption>Bitcoin’s hashrate often falls when the price does. Not this time.</figcaption></figure>



Even diamond-handed Marathon <a href="https://ir.marathondh.com/news-events/press-releases/detail/1288/marathon-digital-holdings-announces-bitcoin-production-and#:~:text=The%20Company%20has%20not%20sold,to%20fund%20monthly%20operating%20costs." target="_blank" rel="noreferrer noopener">warned</a> shareholders earlier this year that it might start selling its mighty bitcoin stash, having historically projected intentions to hold indefinitely. The firm has mostly financed itself on stock sales and other debt raises, <a href="https://markets.businessinsider.com/news/currencies/marathon-digital-stock-price-bitcoin-bond-sale-proceeds-sec-subpeona-2021-11" target="_blank" rel="noreferrer noopener">including</a> a $500 million bond sale last November, as bitcoin was retreating from all-time high.



Todd Esse, co-founder at mining investment firm HashWorks Digital Industries, expressed to Blockworks that the next 30 days will prove critical for bitcoin miners just holding on.



“I think we’re getting to a point where we’re going to start seeing a lot of rings dropping off over the next 30 days, if we stay down at this level or go even lower,” Esse said, adding that he sees room for only two large mining outfits to retain the bulk of their bitcoin.



Falling energy prices could offer bitcoin miners a glimmer of profitability, albeit distant. “The market is being very selective about who can fit in right now, and it’s very tight.”



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Bitcoin Price Drop Tests Miners’ Diamond Hands

Jocelyn Yang

<div id="highlights-block_62bf54b155530" class="highlights">
 <ul>
 <li>Gas-fired power plant is not needed to satisfy the state&#8217;s energy demand, regulator said</li>
 <li>The move came after the state legislature passed a bill in June to restrict carbon-fueled crypto mining operations</li>
 </ul>
 
</div>



A New York regulator has <a href="https://www.dec.ny.gov/press/125678.html" target="_blank" rel="noreferrer noopener">denied</a> bitcoin mining operation Greenidge Generation’s application Thursday to renew an air permit required to continue operating in the state.&nbsp;



The former coal-fired plant located in Dresden, Yates County was converted from coal to natural gas in 2016 and began operating as a bitcoin mining facility in 2020. The regulator, the New York State Department of Environmental Conservation (NYSDEC), said emissions from the power plant could make it difficult for the state to meet its climate goal — reducing the statewide greenhouse gas emissions by 85% by 2050.&nbsp;



Greenidge&#8217;s Air Title V and Title IV (Acid Rain) permits expired on Sept. 6, 2021. The plant was able to continue operation with its expired permits while the agency considered the renewal application.



In the <a href="https://www.dec.ny.gov/docs/administration_pdf/greenidgefinal630.pdf" target="_blank" rel="noreferrer noopener">rejection letter</a>, NYSDEC said Greenidge Generation’s conversion to a cryptocurrency mining operation meant &#8220;it was creating a significant new demand for energy for a wholly new purpose unrelated to its original permit” and that granting the permit would enable Greenidge to continue increasing its greenhouse gas emissions.&nbsp;



The agency added that the plant was operating “primarily to meet its own significant new energy load,” rather than helping to satisfy the state’s electricity needs.&nbsp;



A representative for Greenidge Generation didn’t immediately respond to a request for comment.&nbsp;



In a <a href="https://greenidge.com/wp-content/uploads/2022/06/Statement-of-Greenidge-6-30-22.pdf" target="_blank" rel="noreferrer noopener">statement</a>, Greenidge, claiming the regulator had no legal basis for denying the application, said it would continue operating under its current Title V Air Permit while challenging the regulator’s decision.&nbsp;



Greenidge Generation Holdings Inc.&#8217;s stock had increased by 0.98% as of 3:48 pm Friday.&nbsp;



Greenidge&#8217;s use of fossil fuels to provide power for its <a href="https://cms.blockworks.co/proof-of-work-vs-proof-of-stake-whats-the-difference/">proof-of-work</a> mining operation has long concerned environmentalists. “Governor Hochul and the DEC stood with science and the people, and sent a message to outside speculators: New York’s former fossil fuel-burning plants are not yours to re-open as gas-guzzling Bitcoin mining cancers on our communities,” Yvonne Taylor, vice president of the advocacy organization Seneca Lake Guardian, told the <a href="https://apnews.com/article/cryptocurrency-climate-technology-bitcoin-77c6f441bf8b878689ca22b0143150e4" target="_blank" rel="noreferrer noopener">Associated Press</a>. 



The move also came after a bill the New York legislature <a href="https://cms.blockworks.co/new-york-passes-bill-restricting-carbon-fueled-crypto-mining-operations/" target="_blank" rel="noreferrer noopener">passed</a> in early June, putting a two-year ban on certain proof-of-work cryptocurrency mining operations that depend on carbon-based power.&nbsp;



Greenidge has 30 days to request an “administrative adjudicatory hearing” about the application denial.



“If no appeal is filed, any ongoing operations that generate emissions from the facility would be unlawful without a valid Title V permit,” a NYSDEC spokesperson told Blockworks.



This is a developing story. New information may be added as it comes available.



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