Due to their high correlation to the prices of the assets they mine, crypto mining stocks saw rapid appreciation last year as the price of bitcoin soared to an all-time-high.
With markets off their peak, access to capital has also become somewhat restricted for the miners who need large amounts of funding to stay competitive and grow.
One way miners will be able to navigate this environment is by delivering on their promises to fund growth in more efficient ways by borrowing money, rather than just raising equity.
At the time, Digihost’s market cap was less than $100 million, making a capital raise of $250 million – even over a period of time – a sizable amount.
The share prices didn’t react as negatively right away, given the filings were “shelf” registrations, meaning there was no present intention to immediately sell all the securities being registered.
In light of such market conditions, raising debt through creative ways has become an emerging trend among miners as more lenders enter the market, Argo Blockchain’s CEO Peter Wall said during an earnings conference call on Thursday.
Using specialized bitcoin mining computers, called ASICs, as collateral for loans has become popular among miners to fund their growth plans, as well as using mined digital assets as collateral.
“Although spreads and advance rates are no longer improving in this environment, we still see an increasing opportunity to leverage secured debt solutions, such as bitcoin-backed debt facilities and rig collateralized equipment financing,” Brendler wrote in his note.
However, BTIG’s Lewis warns that access to “attractive capital” or debt terms that are more favorable for the miners may not be possible for all of them.
In fact, Argo’s Wall said he thinks that lenders are going to be more selective about whom they are lending to, with new miners that don’t have a history of building mines or existing relationships with lenders potentially finding it difficult to get financing.
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