Hedge funds enter betting against Bitcoin miner

hedge funds have increased their short positions compared to shares of cryptocurrency miners and bet on the fact that after the collapse of the FTX exchange, even more will go to the financial abyss.

Since the Bitcoin Prize has fallen by almost two thirds this year and the costs for the electricity that miners need to operate their energy-intensive computers, hed funds rely on the fact that the business models are far from profitable.

Bärische Investors have bet that the implosion of Sam Bankman-Frieds Ftx will further deepen the Malaise for a corner of the cryptom market, which quickly grown last year, often with borrowed money, hoping to benefit from the high prices of token such as Bitcoin.

miners who use a network of powerful computers to solve cryptographic calculations against new tokens must constantly update their technology and also depend heavily on the price of the cryptocurrencies they have sold.

"Because crypto is traded far below that where it was and you have many editions, it is not clear that you will ever be able to generate a constant margin," said Chris Crawford, Chief Investment Officer at Crawford Fund in Boston, which runs a hedge fund for Eric Sturdza Investments Mine workers sold empty. Buy empty -like to rely on the fact that the prices will be lower in the future.

The short interest at the US group Marathon Digital, one of the largest listed US mining companies, rose again to more than 36 percent of the outstanding shares in the weeks after the collapse of FTX.

Last year, Marathon paid his former CEO Merrick Okamoto almost $ 220 million in shares. This was promoted by the allocation of shares based on the market capitalization of the company, which is strongly influenced by the Bitcoin Prize. And in October this year he paid him $ 24 million for the settlement of a dispute over previous share allocations.

The company has always made losses. This year it has missed its own production goals that were set last year, namely to reduce 55 to 60 Bitcoin per day and to make forecasts for the achievement of mining gains between USD 86.5 and 103.6 million per month.

investors had already increased their bets on marathon last year and were rewarded when the company's shares collapsed by 86 percent.

The funds have also more than doubled mining their bets against Stronghold digitally - whose shares have already dropped by 96 percent this year - almost 10 percent of the shares since the beginning of the year.

The short interest to Greenidge generation rose from less than 1 percent to 4.7 percent, while Hut 8 Mining and Riot Blockchain, the largest listed US operator, also attracted more attention from empty sellers this year.

already affected by the Baisse in risky assets this year, the crypto prices continued to fall after the dramatic collapse of FTX, which was once estimated at $ 32 billion and whose former CEO Sam Bankman-Fried was arrested on the Bahamas this week after public prosecutors filed criminal complaint.

"The profitability of miners is a discussion that comes up every time Bitcoin falls-and then perceived as a problem for all cryptos," said Kvammen Jensen, co-fund manager of the AKJ Digital Assets Fund.

"Bitcoin mining misses the key point behind digital assets: After all, the goal is to decouple themselves from the traditional world and all its actors and not to go backwards by camping on the power grid," he added.

laurence.fletcher@ft.com