Bitfarms sells 3,000 BTC to pay down loan from Galaxy Digital.
Bitcoin’s price has dropped over 75% from its all-time high, BTC miners have been forced to react by selling and adjust to current market conditions. Becoming a hurdle for the crypto market, as the price of BTC and other larger cryptocurrencies dropped with the selloff from miners to create liquidity for themselves. Companies like Bitfarms had to brake their usual strategy which had been to hold onto its mined bitcoin.
On May 31, Bitfarms reported that it owned 6,075 BTC. Their holdings now stand at 3,349 BTC, taking into account the full 3,000 BTC sold and the added June production at an average of 14 BTC per day.
With the current Bitcoin price of around $21,500, those holdings could be worth roughly $72 million, which is above the 143% of the remaining $38 million borrowed (about $54.34 million).
The company initially said that it lowered the loan by $34 million to $66 million via the sale of 1,500 of its bitcoin holdings. Then it added an additional 1,500 — bringing the total owed down to $38 million, according to a statement on Tuesday.
In addition, the company has canceled a commitment to acquire new hardware by canceling a $37 million deal. In total, Bitfarms has improved its “corporate liquidity by approximately $100 million”.
According to Lucas, the company believes that this strategy is the best and least expensive method in the current market environment.
“In addition to lowering our interest expense, this $34 million reduction in borrowing gives us the ability to utilize more of our BTC holdings strategy as it frees up BTC that would otherwise be used to collateralize this credit facility,” said CFO Jeff Lucas.
The loan was secured with crypto-focused trading and investment firm Galaxy and collateralized at 143% of the amount borrowed. Per the loan agreement, Bitfarms is required to contribute additional collateral anytime the value of the collateral falls below 133%.
"A substantial decrease in Bitcoin price may result in the Company being unable to meet the minimum Bitcoin collateral requirements, which could result in the disposition of the Company's Bitcoin pledged as collateral by the Facility Lender, or repayment of the facility in fiat currency on demand," the company stated in a recent report.
“In consideration of extreme volatility in the markets, we have continued to take action to enhance liquidity and to de-leverage and strengthen our balance sheet, said chief financial officer Jeff Lucas. “While we remain bullish on long-term BTC price appreciation, this strategic change enables us to focus on our top priorities of maintaining our world-class mining operations and continuing to grow our business in anticipation of improved mining economics.”
Unlike previous market cycles, Bitcoin miners can adapt to market volatility and carry on with their operations. Rather than react to the price action, BTC miners are preparing to endure the crypto winter. Jeff Lucas CFO at Bitfarms said:
In consideration of extreme volatility in the markets, we have continued to take action to enhance liquidity and to de-leverage and strengthen our balance sheet. Specifically, we sold 1,500 more Bitcoin and are no longer HODLing all our daily BTC production.
Lucas claims the company is bullish on BTC’s price long-term potential. However, current market conditions require them to change their corporate strategy. Lucas added:
While we remain bullish on long-term BTC price appreciation, this strategic change enables us to focus on our top priorities of maintaining our world-class mining operations and continuing to grow our business in anticipation of improved mining economics.
The positive outlook coming from one of the biggest mining companies is showing they are prepared to storm what people are calling the next “crypto winter”, with all the broader economic conditions occurring as well.
