Crypto lender BlockFi Inc. was declared Bankrupt previously and now plans to sell about $160 million of loans backed by almost 68,000 Bitcoin mining machines. The New Jersey-based company filed for protection from creditors last year in November, initiating a bidding process for the loans. Few of the loans have already defaulted and seem to be undercollateralized given the current prices of Bitcoin mining equipment.
BlockFi had a hard time when FTX collapsed in November and Three Arrows Capital in 2022. BlockFi Filed for bankruptcy right after FTX and initiated a list of companies that went under and that are still attempting to recover their customers’ funds. BlockFi itself is in the same position to achieve the same.
A brief insight into BlockFi collapse
Crypto lender BlockFi filed for bankruptcy protection in November. Following the latest crypto industry casualty after the firm was hurt by exposure to the tremendous collapse of the FTX exchange.
BlockFi founder said in a bankruptcy filing that its substantial exposure to FTX led to the liquidity crisis. FTX creator, Sam Bankman-Fried, filed for protection in the United States earlier last year after traders pulled $6 billion from the platform in three days.
Exposure to FTX seemed to be a major cause of this bankruptcy filing while the debtors do not face the several issues apparently facing FTX, as per Mark Renzi, managing director at Berkeley Research Group. BlockFi justified the liquidity crisis due to its exposure to FTX via loans to Alameda, a crypto trading firm affiliated with FTX.
BlockFi mining-machine backed loans
As per the recent announcement by BlockFi, the company is ready to sell Bitcoin mining machine-backed loans to users using its 68,000 rigs. The $160 million loan is expected to be undercollateralized because of the drop in the price of the mining machines.
Considering the overall average last year, mining rigs under 38 J/Th were worth around the $98 figure. Since then, it lost its value by almost 90% and is currently worth around $9.9. This drastic fall in worth was led by the crash of the crypto market and the decline in BTC price along with the rising costs of operations, such as power costs.
Surprisingly, the drowning mining market still had the likes of BlockFi financing it knowing the fact that traditional lenders maintained a distance due to the high volatility of the crypto market.
Celsius Network sells its miners
As BlockFi is selling Bitcoin mining machine-backed loans, one of the crypto lenders Celsius Network was found engaged in a similar activity but in a different way. Celsius Network officially announced the sale of its mining equipment instead of offering a loan. The crypto lending company filed bankruptcy in court on January 13, and the mining body of the bankrupt company confirmed to sell around 2,687 rigs of Bitcoin miners to an investment company called Touzi Capital.
At the beginning of this month, the founder and Chief Executive Officer (CEO) of the lending firm declared bankrupt, Alex Mashinsky was charged by New York Attorney General Letitia James.
According to Attorney General, The company’s CEO was held responsible for defrauding hundreds of thousands of customers.
Conclusion
The uncertainty in the crypto industry seems to be increasing every day with an escalation in volatility. Investors and crypto experts are concerned about the outcomes of the failures caused by the collapse of major crypto-based businesses as it will eventually affect the overall market price of the digital currency.
