The dramatic rise in bitcoin prices from late 2020 through 2021 prompted significant growth in the bitcoin mining industry, with the number of public bitcoin mining companies growing from a handful at the beginning of 2021 to over 20 by the first quarter of 2022. During that time, bitcoin mining companies took on significant amounts of leverage as they looked to acquire increasing numbers of mining “rigs”— specialized computers that perform the task of bitcoin mining—to capture a larger share of the bitcoin mining hashrate, and to expand data center sites to address increased demand for space to host these rigs and conduct mining operations. While in its early days bitcoin could be mined using an ordinary laptop, today bitcoin mining is dominated by largescale mining operations with tens of thousands to hundreds of thousands of specialized mining rigs costing several thousand dollars each and requiring enormous amounts of energy to power.

Over the course of the past year, however, a steep and prolonged decline in bitcoin prices coupled with surging energy prices have left bitcoin mining firms squeezed between diminished revenues and increased costs, leaving them, in many cases, overleveraged and facing significant economic and structural challenges.

This article originally appeared in the Journal of Corporate Renewal.

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