Argo Blockchain Could Join Bitcoin Mining Casualties

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  • Argo Blockchain has announced that it has failed in a $27 million capital raise
  • The Bitcoin mining firm has warned it may go under if it can’t raise more capital
  • Core Scientific announced similar issues last week

Pressure is growing on Bitcoin miners as Argo Blockchain announced this morning that it could go out of business if it can’t find more capital. A £24 million ($27 million) deal has fallen through, leading to the firm needing to sell over 3,800 ASIC miners for a temporary liquidity boost, but it has warned that it may fail if it doesn’t secure funding. This comes days after Core Scientific warned that a multitude of difficulties may drive it out of business by the end of the year, potentially ushering in another crypto contagion if the problem is significantly bad.

Argo Blockchain Forced to Sell ASICs to Survive

British firm Argo Blockchain has been on a huge expansion drive in recent years, but this has now come to a grinding halt after it announced this morning that a $27 million financing deal has collapsed:

As previously disclosed, the Company signed a non-binding LOI with a strategic investor to raise approximately £24 million ($27 million) via a subscription for ordinary shares. The Company no longer believes that this subscription will be consummated under the previously announced terms. Argo is continuing to explore other financing opportunities.

As a result, the company has been forced to sell 3,843 Bitmain S19J Pro machines it has not installed in order to temporarily increase liquidity. It warned, however, that dark times lie ahead if it cannot secure additional funding:

While Argo is exploring other financing opportunities, there can be no assurance that any definitive agreements will be signed or that any transactions will be consummated. Should Argo be unsuccessful in completing any further financing, Argo would become cash flow negative in the near term and would need to curtail or cease operations.

This would be a bitter blow for Argo, which has been expanding into Texas, and would leave financing companies in a huge hole.

Multiple Headwinds Causing Mining Firms Concern

The situation is, at its heart, similar to the one affecting Core Scientific – the Texas-based miner revealed last week that it could run out of money by the end of 2022, or even sooner, noting to shareholders that it had been “severely impacted by the prolonged decrease in the price of bitcoin, the increase in electricity costs, the increase in the global bitcoin network hash rate and the litigation with Celsius.”

If Core Scientific was a self-financing operation that would be one thing, but it relies on credit from crypto lenders, some of which will now be concerned that Core Scientific may default if they don’t call the loans in. The irony is that lending platform Celsius owes Core Scientific millions of dollars in unpaid electricity tariffs, with the mining company claiming in court documents that it is losing approximately $53,000 per day to cover what Celsius has refused to pay.

This financial block hole, caused by the implosion of the lending platform, is one of the reasons it is unable to pay back loans to other lending platforms, which may, in turn, cause some of them to implode if the loans are significant enough in value.

Hard to Raise Additional Credit

One of the issues that both companies face is that the collateral it uses to obtain the loans, its mining machines, have dropped significantly in value. The Antminer S19, which Core Scientific has been buying and deploying for almost two years, cost $10,000 when they were new but now retail for only $2,000 – an 80% hit on their value. Combine this with high energy prices high and a relatively low Bitcoin value, it’s easy to see why raising fresh credit will be hard.

Many commentators already predicted that Core Scientific would be the first of a number to drop out of the mining game during the bear market, and these predictions already seem to be coming true. With the list of problems increasing and worsening, it’s not hard to see why this crypto winter will be the coldest yet for many Bitcoin miners.