Over the past year, mining companies have raised $11 billion through the issuance of convertible bonds – corporate debt that can later be exchanged for shares. All of this is happening against the backdrop of an active shift towards data centers for artificial intelligence.
After the halving in April 2024, when the block reward was halved, 18 deals for the placement of such bonds were closed.
The volumes of issuances have increased significantly. Companies MARA, Cipher Mining, IREN, and TeraWulf each attracted $1 billion in just one deal. Some bonds came with 0% coupons—investors agreed not to receive interest, hoping for an increase in stock value in the future.
Volumes of convertible bond placements. Source: TheMinerMag
For comparison, a year earlier, most bonds from miners were in the range of $200 to $400 million.
After the halving in April, miners began actively looking towards AI data centers—they needed to somehow cover the revenue gap. But even with this direction, the situation remains complicated. The industry is under pressure from everything: from capricious tokenomics to supply issues and high electricity prices. And also—trade restrictions that throw surprises at the most inopportune moments.
Miners are facing a battle for hash rate and resources for AI
According to investment company VanEck, over the past year, the debt burden of miners has increased fivefold and now amounts to $12.7 billion.
Analysts Nathan Frankovitz and Matthew Siegel believe that the issue is not greed or adventurism, but rather the very logic of the industry. To stay afloat, companies have to spend huge amounts on equipment.
"Previously, miners covered these costs through equity, not debt. But now everything is different," they write.
At the same time, experts refer to the cost of equipment as a "melting block of ice." It quickly becomes outdated, but without it, you can't withstand competition.
The hash rate of the Bitcoin network continues to grow. Source: CryptoQuant
The hash rate of Bitcoin continues to grow, and miners have to invest more and more, both in equipment and in electricity. The higher the competition, the more expensive it becomes to participate in the race.
In October, U.S. Secretary of Energy Chris Wright proposed simplifying the connection of data centers and mining farms directly to power grids. This scheme will allow obtaining electricity without intermediaries and in the required volumes.
Moreover, miners will be able to help the power system itself. For example, reducing load during off-peak hours and, conversely, taking extra energy when there is nowhere to put it. This could make them an important part of the infrastructure, not just consumers of resources.