Bitcoin (BTC) miners have raised $11 billion over the past year through convertible bonds—corporate debt that can be converted into equity—as they transition to artificial intelligence data centers.
According to TheMinerMag, miners completed 18 convertible bond transactions after the Bitcoin halving in April 2024, which will cut block rewards by 50%.
The average size of convertible bond issuances has more than doubled, with mining companies MARA, Cipher Mining, IREN, and TeraWulf each raising $1 billion through single bond issuances. Some of the issued products have coupon rates as low as 0%, indicating that investors are willing to forgo interest payments in exchange for potential equity upside.
In contrast, most convertible bonds issued by Bitcoin miners in the previous year ranged in size from $200 million to $400 million.
The mining industry is diversifying into AI data centers to address revenue shortfalls following the halving in April 2024. Miners continue to face a challenging business model affected by token economics, trade policies, supply chain issues, and rising energy costs.
A recent report from investment management firm VanEck shows that miner debt has surged by 500% over the past year, totaling $12.7 billion.
However, VanEck analysts Nathan Frankovitz and Matthew Sigel point out that these debt levels reflect a fundamental issue in the mining industry—significant capital expenditures on mining hardware, which in some cases must be upgraded annually.
"Historically, miners have relied on the equity markets rather than debt to fund these massive capital expenditure costs," they wrote, referring to the substantial hardware costs required to remain competitive as "melting icebergs."
The continuously rising Bitcoin mining hash rate—the total computational power securing the Bitcoin network—is also growing, forcing miners to consume increasing amounts of computational and energy resources over time.
In October, U.S. Energy Secretary Chris Wright proposed regulatory changes to the Federal Energy Regulatory Commission (FERC) that would allow data centers and miners to connect directly to the energy grid.
This would enable these energy-intensive applications to meet their energy demands while acting as controllable load resources for the energy grid, balancing and stabilizing power infrastructure during peak demand periods and cutting excess energy during low demand periods.
Related: The Federal Reserve hints at the "end of quantitative tightening": What does this mean for Bitcoin (BTC) prices?
Original article: “Bitcoin (BTC) Mining Industry Transitions to AI Data Centers with $11 Billion Convertible Bond Financing Boom”
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