Hut 8 CEO Asher Gennot predicts that there will be significantly fewer Bitcoin (BTC) mining companies filing for bankruptcy in the future compared to 2022. He attributes the bankruptcies in 2022 to firms being overleveraged and unprepared for rising energy costs. Gennot believes that the high leverage in 2021 was a major factor in the mining sector’s distress and bankruptcy cases.
Bitcoin mining firms such as Compute North, Celsius Mining, and Core Scientific faced bankruptcy during the crypto winter in 2022. However, Gennot notes that since then, Bitcoin miners have shifted to relying on less leverage and obtaining more debt-free capital from equity markets, enabling them to grow their businesses. He expects an increase in mergers and acquisitions (M&A) activity among smaller-scale Bitcoin miners, which he believes will contribute to a lower rate of bankruptcies.
Gennot suggests that for a significant amount of M&A activity or “distress opportunities” to occur, Bitcoin would likely need to retrace to $30,000 or $40,000. He also highlights that after the upcoming Bitcoin halving event on April 20, investors will likely favor large-scale operators with the lowest production costs.
In December, Gennot founded US Bitcoin Corp (USBTC) and merged it with Hut 8 Mining Corp’s operations, resulting in the formation of Hut 8 Corp in Miami, Florida. The merged company now holds over 9,100 Bitcoin, valued at $600 million, on its balance sheet.
Bitcoin’s current price stands at $66,000, with the halving event approaching in 17 days. Historically, Bitcoin has reached new all-time highs around 6-12 months after the halving event. However, the recent price surge saw Bitcoin surpass its previous all-time high of $68,990 on March 5, which occurred approximately 46 days before the halving. Some industry experts attribute this atypical price action to the recent launch of spot Bitcoin exchange-traded funds in the United States.
In summary, Gennot anticipates a decrease in Bitcoin mining firms filing for bankruptcy in the future due to reduced leverage and increased debt-free capital. He predicts an uptick in M&A activity among smaller-scale miners and expects investors to favor large-scale operators with lower production costs after the halving event.