At the peak of the collapse of the world’s former second-largest cryptocurrency exchange FTX, the disgraced founder, Sam Bankman-Fried, placed his biggest bet with the Bitcoin mining business Genesis Digital Assets.
According to a story that was published by Bloomberg on December 2nd, Alameda kept pouring money into the company even though the price of Bitcoin was falling and rising energy costs were wreaking havoc throughout the sector.
During a capital round in April, Alameda and FTX made their largest venture investment to date, which resulted in the firm being valued at $5.5 billion.
Alameda invested a total of four unique amounts of funds into the cryptocurrency miner. In August of this year, it made an investment of around $100 million in the miner. It made an initial investment of $550 million in January, accompanied by further investments of $250 million in February and April.
It is interesting to note that the news of Alameda’s investment in Bitcoin mining came only a few hours after it was disclosed that the venture arm had helped save FTX in the previous year.
The venture capital business contributed up to one billion dollars to FTX’s operation. This occurred as a result of the failure of the exchange’s infrastructure to protect it from the leverage that a client had on a token.
Moving forward, when Genesis was at its strongest, its trading assets totaled approximately $5 billion. According to the dashboard provided by Arkham Intelligence, the value of the company’s trading assets was around 238 million dollars at the time this article was written.
Given the price drop of Bitcoin, skyrocketing energy prices, and increased rivalry among miners, the business of Bitcoin mining moved from being one of the most profitable corners of the crypto world to being one of the most distressed sectors in a very short amount of time.
Due to a crucial mining income gauge reaching an all-time low, some of the industry’s most prominent mining corporations are on the brink of going bankrupt.
Genesis Digital initiated an aggressive growth strategy across the United States after receiving the funds. As a result of the company’s success in securing more than 700 megawatts of electricity for its mining operations in Texas, South Carolina, and North Carolina during the first half of 2022, the business has become one of the most important Bitcoin miners in the United States.
How the Bitcoin mining industry is doing amid Alameda/FTX collapse
The month of November was again another trying one for bitcoin miners, as the difficulty of mining reached new all-time highs and there were rumblings of bankruptcies among the top listed businesses.
After reporting a loss of $435 million, bitcoin miner Core Scientific issued a statement on November 22 indicating that the company has significant doubts about its capacity to continue operating. After a further drop of 25%, Core Scientific’s year-to-date loss now stands at over 99%.
The company stated in its earnings call for the third quarter that the estimates of the amounts of required liquidity vary significantly depending on their assumptions regarding the timing and ability to achieve more normalized levels of operating revenue. Core Scientific also stated that it is very difficult to predict when or if Bitcoin’s price will recover or if energy costs will decrease.
Bitcoin miners are also being forced to liquidate their BTC holdings, a trend that has been developing over the whole year and that is likely to become much more pronounced in the months to come as margins continue to be compressed.
In addition, miners are closing facilities while the cryptocurrency market remains in a bear market for much longer than expected.