The growth in share value for synthetic intelligence (AI) and high-performance computing (HPC) corporations since September has delivered extraordinary returns for bitcoin miners increasing into these industries, however the development comes at a value.
Bitcoin BTC$107,764.56 has risen simply 10% this yr, and with the bubble popping in company bitcoin treasuries in current months, the narrative has shifted towards miners reworking their enterprise fashions. Miners have been more and more energetic within the debt markets as they search to finance formidable buildouts of their AI and HPC companies.
Based on The MinerMag, their mixed debt and convertible notice choices reached document ranges within the third quarter with estimates ranging as excessive as $6 billion. That raises the danger of default, and buyers will now be centered on seeing significant income technology from the pivot.
TerraWulf (WULF), MARA Holdings (MARA) and Cipher (CIFR) collectively raised billions via convertible bonds through the quarter, whereas CleanSpark (CLSK) tapped credit score traces to bolster their stability sheets.
The momentum has carried into the fourth quarter. TerraWulf launched a $3.2 billion non-public placement of senior secured notes, reportedly the most important single providing ever by a public miner, in keeping with the The MinerMag. Quickly after, IREN (IREN) issued a $1 billion convertible bond and Bitfarms (BITF) introduced a $300 million convertible notice.
A few of these devices, similar to IREN’s, carry a zero-coupon construction. Others, like TerraWulf’s newest issuance, characteristic larger prices, with a 7.75% coupon translating to an annual curiosity expense of roughly $250 million. This far exceeds the corporate’s 2024 income, which totaled simply $140 million, in keeping with The Miner Magazine.
Is This Time Totally different?
Through the 2022 bear market, when the hashprice collapsed as bitcoin fell 70%, lenders seized machines that had been used as mortgage collateral, a method seen when Core Scientific (CORZ) filed for Chapter 11 chapter.
The MinerMag suggests the AI-HPC focus differentiates the present debt-fueled fundraising cycle distinctive. By pursuing diversified revenues the miner could possibly scale back the dangers.
The market is rewarding larger valuations for miners pivoting from pure-play bitcoin operations to AI/HPC companies. Whereas convertible bonds nonetheless lead to shareholder dilution, the pivot can be attracting a brand new investor base.
The CoinShares Bitcoin Mining ETF (WGMI), usually seen as a proxy for the broader bitcoin mining sector, is up 160% year-to-date.
