“It was painful but necessary,” Alex Martini, CEO of mining hosting firm Blockfusion, told CoinDesk, regarding the selling of “millions” of dollars worth of bitcoin reserves to service the firm’s debt. Now Blockfusion has a cash reserve to last about six months, but “if the market doesn’t turn” the company “will be forced to do another round” of liquidations, he said.

Older machine models are becoming unprofitable and turned off.

Miners once steadfast on their “hodl” strategy (holding bitcoin rather than selling it), are now being forced to liquidate their crypto holdings to pay for operating costs and loan installments.

The miners that use the latest machines and have low electricity prices – less than 6 cents per kilowatt hour, keeping their overall cost of mining a bitcoin below $10,000 – can still make ends meet and fulfill their loan obligations, said Brian Wright, Galaxy Digital’s vice president of mining.

On the higher end, public and private miners have borrowed a total of $3 billion to $4 billion in loans backed by mining computers, estimated Chief Economist and Chief Operating Officer of mining firm Luxor Technologies, Ethan Vera.

Firms that placed orders for mining rigs “at the height of the bull market for peak prices with a significant deposit,” are now “in a difficult spot to follow through,” said Jamie Leverton, CEO of Hut 8 Mining (HUT). “In due course, we’ll see some defaulted loans, unclaimed miners, and acquisition targets,” Leverton said.

Miners that were 100% financed, are less than two years old and are small without beneficial economics are likely to be the first ones to see defaults on the associated loans, said Van Huis.

If the “economics don't change, it's just a matter of time until some miners default” while at the same time “lenders have relatively little recourse” to “save themselves” because the value of collateral, usually mining machines or bitcoin, is dropping every day, the insider said.