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Jihan Wu’s BitDeer Looking to Buy Distressed Assets as Mining Rigs Get Cheaper

BitDeer, a crypto mining operation backed by former Bitmain CEO Jihan Wu, has set up a $250 million fund to buy distressed assets from Bitcoin miners according to statements made by its CEO, Matt Kong, to Bloomberg.

Kong suggests that they are taking advantage of the market cycle which has seen mining equipment become way cheaper as the industry is in a slump and highly leveraged miners are selling rigs for less. He notes that every market cycle presents opportunities if well timed. He said choosing an entry point at the bottom to come out at the top to make money “works especially well for mining.”

 

Bitcoin mining equipment now cheaper
Bitmain, the world’s leading producer of cryptocurrency mining hardware, had recently announced a discounted price for one of its top miners, the Antminer S19 PRO for $19/T —having once exceeded $100/T—for the 100T device with an energy efficiency ratio of 29.5J/T. When compared with the the price of S19j Pro (with a slightly higher hash rate of 104/T) five months ago, the discounted rate is 80.96% cheaper. 

This slash is somewhat indicative of the general state of the Bitcoin mining industry which crypto data intelligence firm, GlassNode, notes as of September 28 has seen the Bitcoin Miner Balance record large outflows since prices were rejected from the local high of $24,500. It says this suggests that aggregate miner profitability is still under a degree of stress with ~$8,000 BTC/month being spent to cover USD denominated costs.

By the first week of October, GlassNode says Bitcoin has been trading very close to its estimated cost of production price since the June sell-off. It indicates that the Difficulty Regression Model is hovering at $18,300 to signal a potential threshold for acute income stress in the mining industry.

Miners brace as largest mining difficulty expected   
Declining hash price in step with Bitcoin’s price has been an issue for miners including those with access to cheap power and/or a power purchasing agreement in place. Aside from losing its credit pipeline, anaemic mining economics and rising energy prices were crucial for the largest Bitcoin mining hosting sites in the US to file for chapter 11 bankruptcy.

Compute North, second only to Core Scientific in size of hosting services in the US, is reportedly seeking a way to pay back $266 million in debt to creditors over time via a 363 asset sale, according to Luxor Mining. A sale under Section 363 of the US Bankruptcy Code requires going for a court hearing for an approval that could see the liquidations take two forms. There could first be an asset sale which is not limited to computing equipment and equal to or less than $1 million then an auction for any other assets not sold in the previous sale.

With a double digit difficulty increase expected—projected to be the largest of the year—which will likely drive hash price to all-time lows, Luxor Mining foresees a “gruelling autumn” for miners especially if Bitcoin’s price drops even further. “The only bright side is that this will likely shake out high-cost, low-efficiency miners off the network, which could taper hash rate enough to give us a negative adjustment next go round.”

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