During the 2021 crypto bull, lenders issued over $ 4 billion in loans collateralized by Bitcoin mining hardware. These financial instruments backfired on BTC mining companies as the sector trended to the downside, and they defaulted on their loans.
According to a report from Bloomberg, bankrupt Bitcoin miner Core Scientific will return over 27,000 mining machines to crypto lender New York Digital Investment Group (NYDIG). The decision aims to try to write off a $ 38.6 million debt with the firm.
Crypto Lender Takes It All
BTC miner Core Scientific received court approval to send the machines to NYDIG. The parties will complete the transaction in the coming months.
According to the report, NYDIG benefited from the crypto rally by issuing over $ 370 million in loans to Bitcoin miners in the past two years. However, the crypto winter impacted these entities, which are looking for alternatives to stay afloat while the price of Bitcoin trends to the downside.
Core Scientific is one of the many companies to send NYDIG its mining equipment. The crypto lender has received “tens of thousands of machines,” according to the report. The BTC mining sector has been the most affected by the price decline across digital assets.
Separate data from on-chain analytics firm Glassnode indicates miners sold a large portion of their inventory during the bear market. These companies liquidate their BTC supply to maintain their operations afloat.
When BTC miners sell their supply, the cryptocurrency experiences further downside pressure. However, once these entities stop selling Bitcoin, the crypto market tends to recover.
As seen in the chart below, the end of miners’ capitulation coincided with the beginning of a new bullish cycle. Expert Dylan LeClair commented the following on events related to miners’ activities and their implications for the crypto market:
Hash rate moving averages for a different perspective. Miners look to be running out of inventory to dump.
In addition to taking over BTC mining equipment, NYDIG is on its way to becoming a major operator. The firm accepts mining space as part of writing off debt from its counterparts. The recent Bitcoin rally might relieve the sector if the cryptocurrency can sustain its current momentum.
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