Loan Request Drives Iris Energy to Reduce Bitcoin Mining Capacity

• by Artem
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• November 23, 2022
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• Bitcoin News

Iris Energy, an Australian cryptocurrency mining business focused on establishing BTC mining facilities in Canada that only use renewable energy, has just stopped mining in two subsidiaries. However, the company continues to insist that its operations are profitable.

According to the company’s statement, the subsidiaries functioning as Special Purpose Vehicles (SPVs) employed Bitmain mining equipment that was paid for by a $107.8 million borrowing from the New York Digital Investment Group (NYDIG). The crypto winter, however, has destroyed the confidence many investors had in cryptocurrencies, necessitating a demand for rapid loan payback.

The affected crypto miners had a far lower return on investment than anticipated due to a combination of unfavorable market circumstances, an increase in mining difficulty, a rise in the cost of power, and a decline in the price of BTC. Fortunately for Iris Energy, the equipment acquired with the loan was also put down as collateral, so the debt will be settled by simply turning the machines over to NYDIG.

Daniel and Will Roberts’ firm, Iris Energy, recently lost $220 million in market value due to a 94.5% decline in its stock, IREN. The brothers have declared that they remain upbeat about the cryptocurrency sector. They also reaffirmed that their business model is still lucrative despite certain changes. The current profit per bitcoin mined at their facilities is roughly $6,000. Even if this is sufficient to keep the firm operating, it is not ideal when considering the operational expenditures projected during more prosperous times.

“At a gross profit level, it’s clearly still profitable. We just need to work out what level of overhead the business can support. (…) We’re dealt the cards we are and all we can do is pre-empt future issues, which we did around the [SPV] debt facilities by ringfencing them. We’re still super excited about the business and the industry.”

Iris’s mining capacity has been reduced by more than half, or 3.6 EH/s (exahashes per second), due to the closure of the 2 SPVs. Iris now has 2.4 E/Hs of total remaining mining capacity. Fortunately, the company has already found a bright spot. Bitmain has already received $75 million to outsource even more mining equipment. Iris and Bitmain are now in discussions over the operation of these miners, which might significantly increase Iris’s mining power by 7.5 E/Hs.