Key Points
Rhodium Enterprises, a U.S. Bitcoin miner, has filed for bankruptcy with debts between $50 million and $100 million.
The company’s financial struggles are attributed to declining profits for Bitcoin miners and increasing electricity costs.
Rhodium Enterprises, a U.S. Bitcoin miner, has filed for bankruptcy in the Southern District of Texas. The company is reported to have debts ranging from $50 million to $100 million. The total assets of the company are estimated to be between $100 million and $500 million.
Subsidiaries and Financial Difficulties
The bankruptcy petition includes six subsidiaries; Rhodium Encore, Jordan HPC, Rhodium JV, Rhodium 2.0, Rhodium 10MW, and Rhodium 30MW. The financial difficulties of Rhodium Enterprises have been amplified by decreasing profits for Bitcoin miners, particularly after the most recent halving. The reduction in miner rewards, combined with higher electricity prices, has further decreased miners’ profits.
In July, Rhodium Enterprises was unable to repay loans totaling $54 million. In 2021, the company secured $78 million in loans for its subsidiaries. Despite two proposed debt restructuring plans, disagreements among stakeholders resulted in a default.
Chapter 11 Filing and Bitcoin Mining Challenges
Following the collapse of the Terra ecosystem, numerous cryptocurrency companies have declared bankruptcy. Many of these companies are undergoing the necessary procedures in the U.S., where filing under Chapter 11 of the U.S. Bankruptcy Code allows them to reorganize their business and repay their debts.
Bitcoin mining has faced challenges due to the April halving and the drop in its price. Independent mining, given the rising electricity costs, is likely to generate a net profit after taxes. However, financial reports from major companies indicate that their Bitcoin mining costs in July exceeded $60,000 per coin.
Mining Centralization
Rhodium’s bankruptcy is a reflection of a prediction by CryptoQuant analysts that miners would gradually exit the market. Smaller companies require more funds to purchase expensive equipment, leading to the formation of conglomerates of large participants in the market. This is confirmed by data from BTC.com, which shows that two mining pools control over 50% of the current Bitcoin hashrate — Foundry USA and AntPool.
