Bitcoin Miner Iris Energy Defaults On Loan
In today's edition of YIYL, (You Invest, You Lose) we head back to the much-mangled bitcoin mining sector. As the price of bitcoin declined from 69 000 down to $16 000 the ability to generate cash flow from bitcoin in fiat terms isn't as lucrative as it once was, and those that did the math based on certain price points.
Since bitcoin doesn't look like it will be recovering anytime soon due to the increase in interest rates, pushing investors out of risk on trades to collect the positive returns on bonds, we've seen equities and other risk-on assets drained of liquidity.
Add to that the blow-ups in the shitcoin and exchange space, and the confidence in moving capital into the space has been hit with several sucker punches. So anyone in distress trying to raise money is going to find it hard.
Iris Energy Faces Economic reality
One of the larger miners in the space, Iris has been in distress for some time and after announcing earlier in the month that they were close to defaulting on a $100 million+ loan, Iris Energy has defaulted.
As fate would have it, mining on leverage isn't the smartest play, and now Iris, Unable to pay the $7 million/month in debt obligations with their $2 million/month gross profit, the company has had to face the music.
Iris Energy has powered off 3.6 EH/s worth of mining capacity and called time on operations.
Iris is down but not out yet and has stated that capacity remains at around 2.4 EH/s which includes 1.1 EH/s of hardware in operation and 1.4 EH/s of rigs in transit or pending deployment.
Now we don't know if they can restructure debt and then lean up operation to make it through the bear market, or if this is just theatre and they will eventually have to close up operations under the weight of debt and wipe out their equity holders in the process.
https://twitter.com/caprioleio/status/1594671729917714437
Talk about the price
Upon the news, Iris Energy stock slumped 18% on the day to trade at $1.65 in after-hours trading, which is quite the pummelling and salt in the wounds for any long-term holder of the stock.
Iris Energy's stock has plummeted to $1.66, down 93% from its $24.80 peak when the stock first began trading a year ago, so anyone who held that stock is well and truly rekt.
Bitcoin miners are currently suffering a triple whammy of high hash rates and difficulty, high energy prices, and low Bitcoin prices and I don't think that Iris will be the first or last miner who got over their ski's in finance and now have no idea how to cover their obligations.
Sources:
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The full fallout from miner capitulation hasn't been seen yet. A lot will get blown out and at some point those trying to stack coins this entire time will get pressed out.
I agree with you there are still miners, exchanges and tech companies in the space, that are burning through their runway and not making income to suppliment it or they're starting to fall behind on debt repayments and they hoping that someway the price goes up so they can cover these short falls but this is going to a long and winding road littered with dead products, businesses and services who thought they are too smart
What makes it more aggravating to me is that it becomes even more impossible to raise money even when we know what is going on. People look at me like some tweak job and I tell them this next year and a half is when to take positions and laying the foundation on projects but I might as well have no teeth and be begging on the street corner. It's crazy. Have you thought about having your own project? You have the knowledge and you aren't a scammer so that is immediately 100X better than most projects.
Honestly, I've had a good time to think about it and I don't yet see what my "killer app" would be, personally, I think most of the stuff being built right now is vapourwear and I think it's worth waiting to see what tech survives before you build on it. I am happy to miss out on 10 000 x gains, 10x is fine if I know its something that can sustain itself
Right now wallets are shit, tech is clunky and users are too exposed to the backend of stuff, and if they are not you get shit like meta mask which is basically a hybrid custodial model.
For now, I am watching it infold on the sidelines stacking sats and if the idea and the opportunity show themselves (one good thing is so much open source code is available) I will seriously consider it. But right now I don't think its the right time yet
I certainly get your thinking because I have had similar type thoughts myself. There are things in the space that don't really excite me or I know too much and have experienced the risk in it first hand so it makes it hard to push it hard as some big project where I would try to get others investing.
Also some of the stuff always seems almost there and getting it the rest of the way would be very expensive and time consuming and still might not work.
I have also thought about buying up so much of a projects coin that I could effectively "take over". Doing that signs me up for a lot of additional work to correct various issues or to build up and promote the project.
Personally I do think the social media space and the gaming space do have a lot of potential in regards to the crypto / blockchain space. Even as dumb as some of the NFT related stuff was I can see a path for someone owning a character with certain attributes that can earn them money inside a video game. We see this premise with all these games like Counter Strike, Second Life, World of Warcraft .... etc. I just don't understand why no one is able to combine those types of environments with a more full blown money making proposition tied into crypto. It's like no one is ever capitalized enough to pull it off and the ones that do generate some money from some pitch just end up being scammers.
Then the non scammers don't want to leave everyone high and dry so they often don't attempt these projects. Also there are a lot of people that want to keep a lower profile and don't want to put themselves out there in that way.
It's tough to know what the answer is but I could easily see a first person shooter or a racing game where you can win the pot being successful. There has to be a way to take existing game code and make it to where usernames can be crypto addresses that are human readable and just adapt that.
I agree with you that the building blocks are there but I think the industry is underestimating the length of time it takes to build something that can truely scale. Ill give the example of Instagram or Whatsapp, the only reason its so big is because it sync'd up with the adoption of smart phones and its one of the first apps that really gave you access to the power of a smart phone
As for your gaming example, yes I can see that happening, but building your own game is tough, I would rather focus on building an SDK that you could sell to gaming studios, so lets say you start with mobile gaming studios and prove your use-case giving users access to microtransactions in games they already enjoy but using say bitcoin or stablecoin which is much cheaper and faster, then you have something you can take to a Ubisoft or an EA, they can buy you out or licence your code, or bring you in as a merger
But I don't see this being like oh I created Halo with bitcoin rewards and people are doing to stop playing Halo the original, the idea of getting normies to leave what they know is too expensive and time consuming, its better to take what they know and slap on something that provides value and better incentives.
User and customer acquisition can be really expensive as well. I think that is a big reason Elon went through with buying Twitter. He has that userbase that have a vested interest in their accounts and the time they spent building a following. Then if he builds payment and transaction rails on top of that it ends up being this addon to an existing community / userbase.
100% people claim that he overpaid for it and that people are leaving the site, but you have
That can all be targeted at a far cheaper rate and turn them into customers and repeat customers at that, which is far cheaper than trying to do that with a new brand, even with Elons name behind it
Yeah, building accounts up and reputation takes so much energy and especially in the modern age this online persona and reputation is hugely valuable in the attention economy.
That is why I'm really monitoring what is going on with these various blockchain social media offerings. There has been a huge amount of energy to get to where we are at currently and the question has to be will tech and attention move faster than we can gain ground.
BTC, ETH, BNB are huge wealth super collectors. I don't like things about all those offerings and like to diversify outside of those but it is tough to dethrone the king of the mountain.
So suddenly is the best play to not know nearly as much and just play in curated indexs..... S&P 500 , Bitcoin....etc and just pump all our time into trying to earn at the highest rate we can obtain / hour or per day?
It's a tough thing to figure out and at the end of the day people will have to bring even more energy in this cycle than previous cycles to "get rich." It's the misstep people made this last cycle.... expecting too big of multiples when actual big money doesn't need that high of a multiple to make billions.
My conclusion from my experience in this game is that I don't have a unique edge in the shitcoin market, Im not an issuer, I don't have premines, I dont get OTC deals, I don't get allocations, I don't have bots running, I don't have time to watch markets and monitor every tweet to give me an edge so I'm most likley to get creamed
Which I did,
My goal is to preserve as much purchasing power as I can, as my local currency sinks and bitcoin is the only bearer asset I can hold so that's what I'm doubling down on, most of my stack was earned from trading my working hours, so its rational that's how i;ll increase it most not by trying to yolo or yield farm
I've been wrecked, hacked and rugged in the past, so just trying to salvage from that, and move on. I personally think bitcoin alone has enough multiple in it that trying to squeese that extra 5,10% beta on a shitcoin is kinda meaningless if you put it over a long enough time frame
I agree with what you are saying and I have came to similar type rational that a person has to be in that upper 5% compared to the competition because we are all trying to take each other's resources in this open market. As weird and as sad as it sounds.
Why do we align with various guys in this space? Because we think it will aid us in getting more resources which will in turn get us more women.
The same as selecting a wingman or talking to other guys about women. We feel those guys can help us in that leg of the game.
Was Scam Bankman's play more efficient? Are we just player haters and he outsmarted lesser players???? Or does he end up broke and spends the rest of his days getting his back blown out by his cellmate Magnus in a supermax prison?
Risky move.... but we will see how it plays out for him.