Bitcoin Miners Deleverage, Scale Back as Crypto Winter Continues into 2023 | Tech News

Bitcoin Miners Deleverage, Scale Back as Crypto Winter Continues into 2023

Cash-strapped Bitcoin miners are reducing loans and scaling back their operations as the crypto-mining industry continues to weather a plunge in the digital asset’s price.

| Updated on: Jan 11 2023, 08:40 IST
This malicious Firefox add-on stole thousands of dollars in cryptocurrency
1/6 A particular malicious add-on for Firefox, that goes by the name Safepal Wallet, has managed to scam users by stealing money from them and managed to live on the Mozilla add-ons store for seven months before getting detected and removed. (Pixabay)
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2/6 Safepal is essentially a cryptocurrency wallet application that is capable of holding more than 10,000 types of assets, including Ethereum, Bitcoin, Litecoin, etc. However, Safepal is an official smartphone app that is available for Apple and Android both. There are no known “authentic” Safepal browser extensions. (BleepingComputer)
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3/6 According to a post shared by a user who goes by the name Cali on the Mozilla Support forum, within a few hours of installing and logging in to the Safepal Wallet extension with their real Safepal credentials, they saw their wallet balance drop to $0 from $4,000.  (Mozilla Support Forum )
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4/6 While investigating Safepal Wallet, BleepingComputer came across the phishing domain used by the add-on and this webpage was also listed as the "support site" link on the fake add-on's home page: WHOIS records indicate the this phishing site was registered in January this year via Namecheap. And BleepingComputer reported that at the time of them filing this report, the webpage is still live and it instructs people to key in their "12-word Backup Phrase in the correct order to pair your SafePal Wallet". (BleepingComputer )
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5/6 Once the recovery phrase is entered and the form is submitted, the page refreshes without any noticeable response and the recovery phrase is sent to the attacker. A stolen recovery phrase can give attackers control over your wallet along with the ability to access and transfer funds. (Pixabay)
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6/6 Five days after Cali publicly reported the incident, a Mozilla spokesperson responded to say that they were investigating the issue and the page for Safepal Wallet has since been removed by Mozilla. The Mozilla add-ons store now has one-star reviews posted by some users that are warning others to not download “Safepal Wallet”. (BleepingComputer )
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As cryptocurrency continues to witness a downturn even into 2023, Bitcoin miners are scaling own their operations. (REUTERS)

Cash-strapped Bitcoin miners are reducing loans and scaling back their operations as the crypto-mining industry continues to weather a plunge in the digital asset's price.

During the historic bull run in late 2021, miners raised billions of dollars in debt financing to fund their expanding operations. But since the crash early last year, publicly traded miners are refinancing and selling coin reserves as well as equity to repay loans and cover operational costs.

“Miners are trying to deleverage to avoid margin calls or an imminent liquidity crunch if Bitcoin drops below a certain price point,” Wolfie Zhao, an analyst at crypto-consulting firm BlocksBridge, said.

Miners like Marathon Digital Holdings Inc. have raised hundreds of millions of dollars in loans backed by the coin from crypto-friendly banks such as Silvergate Capital Corp., which has been reeling from the crypto industry meltdown.

Core Scientific Inc., the largest Bitcoin miner by computing power, was the first major public mining company to declare bankruptcy in December, citing falling Bitcoin prices and soaring energy costs for its cash-flow issues. The Austin, Texas-based company is trying to work out a plan to repay its creditors.

Last month, Marathon eliminated its $30 million revolver debt, increasing its unrestricted cash to over $100 million, according to BlocksBridge.

Money raised from debt financing by 15 major public mining companies has been shrinking since the first quarter of 2022, and for the first time in the third quarter it contracted $112.6 million, according to data compiled by BlocksBridge. That's compared to a total of $348 million and $188 million in the first and second quarters, respectively, said BlocksBridge. Overall, net spending on mining infrastructure fell 77% to $180 million in the third quarter, compared to the prior quarter, the firm's latest data revealed.

Any sudden drop in the price of Bitcoin can lead to a major liquidity crunch. Bitcoin rose as much as over $45,000 in March 2022 but fell a month later to $29,000 as cryptocurrency Terra Luna crashed, wiping out about $40 billion in the crypto market. The Federal Reserve's tightening monetary policy and implosions of big digital-asset firms such as hedge fund Three Arrows Capital and crypto exchange FTX have also weighed on the token's price throughout last year. Bitcoin tumbled by about 65% in 2022.

Some miners like Riot Platforms Inc. and Bitfarms started selling their coin reserves last year to boost liquidity. Marathon, which tends to hold on to its mined coins, still has 12,232 in Bitcoin on its balance sheet. About 36% of the reserve is restricted, secured against its remaining loans as of Dec. 31, according to BlocksBridge.

Core Scientific and Riot sold equity to raise money amid the slump. Argo Blockchain proposed issuing shares last year, though the offering didn't take place.

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First Published Date: 11 Jan, 07:45 IST