Miners’ bad luck: Rhodium goes bankrupt

The company filed for bankruptcy in the Southern District of Texas.

The US Bitcoin mining company has debts of between $50 million and $100 million, and Rhodium Enterprises’ total assets are estimated at between $100 million and $500 million. The bankruptcy petition includes six subsidiaries: Rhodium Encore, Jordan HPC, Rhodium JV, Rhodium 2.0, Rhodium 10MW, and Rhodium 30MW.

The company’s financial difficulties have been exacerbated by the decline in profits for Bitcoin miners, especially after the last halving. The reduction in miner rewards, combined with higher electricity prices, has further reduced the size of miners’ profits.

Rhodium Enterprises defaulted on $54 million in loans in July. The company borrowed $78 million for its subsidiaries in 2021. Despite two proposed debt restructuring plans, disagreements among stakeholders led to a default.

How do crypto companies file for Chapter 11?

Following the collapse of the Terra ecosystem, a wave of bankruptcies swept the cryptocurrency market, with Celsius Network, Three Arrows Capital, Voyager Digital, FTX, and several other major crypto firms declaring bankruptcy.

Many of these companies go through the relevant procedure in the US; filing under Chapter 11 of the US Bankruptcy Code allows companies to reorganize their businesses and pay off debts to creditors.

Under Chapter 11, the company can also restructure its debt and continue operating. As for mining companies, Core Scientific did the same in 2022, filing for bankruptcy to protect itself from creditors. The company emerged from bankruptcy in early 2024.

Worst time to mine bitcoin

Bitcoin mining has had a tough time since the halving in April and the price (BTC) crash. Experts at BlocksBridge Consulting said that cryptocurrency mining is on the verge of profitability for market participants who do not have access to cheap electricity. Even after the Bitcoin price recovered, the hashrate barely exceeded $40 per PH/s.

According to experts, in the context of rising electricity costs, independent mining will probably bring net profit after taxes. Financial reports of three major companies, MARA (Marathon Digital), Core Scientific and Riot, show that in July Bitcoin mining costs exceeded $60,000 per coin.

Also, CryptoQuant analysts noted that the Hash Ribbons indicator shows that large miners are switching to more energy-efficient equipment and returning to the market. CryptoQuant experts believe that miners will continue to adhere to the chosen strategy of investment diversification and expect the value of the first cryptocurrency to rise to $ 70,000 and above by the end of the year.

Mining centralization

Rhodium’s bankruptcy exemplified a statement by CryptoQuant analysts, who predicted that miners will gradually leave the market. Smaller companies will need more funds to purchase expensive equipment, and conglomerates of large participants will begin to form in the market.

Source: btc.com

According to BTC.com data, two mining pools control more than 50% of the current bitcoin hashrate: Foundry USA and AntPool.