Bitcoin mining operator NFN8 Group Inc. and its subsidiaries have taken the scary path of officially filing for Chapter 11 bankruptcy. The company is facing financial difficulties due to a fire at its Texas facility and is seeking court protection from creditors.
NFN8 filed for Chapter 11 in the United States Bankruptcy Court for the Western District of Texas. The move comes as a shock to many who have witnessed the company’s rapid growth in recent years.
Increased pressure on fires, leases and mining margins
NFN8’s bankruptcy filing can be traced back to multiple events over the past year. It began after a fire broke out at the company’s leased facility in Crystal City, Texas, reducing mining capacity by more than 50%.
This fire incident came at perhaps the worst possible time for NFN8. After the Bitcoin halving in April 2024, global mining profitability was declining due to the compression of the hash price (a measure of mining revenue per unit of computing power).
NFN8’s operating model – a sale-leaseback equipment financing program with over 250 trading partners – became unsustainable due to a significant drop in revenue. In addition, the company’s ongoing legal and tax issues are adding to its financial burden.
To avert a crisis, NFN8 secured a $2.75 million debtor loan from Twelve Bridge Capital LLC to continue critical operations during a court-supervised asset sale.
At its peak, NFN8 operated over 5,000 Bitcoin mining machines in Texas and Iowa as the industry expanded from the late 2010s to the early 2020s. The company had to navigate a period of uncertainty as its main hosting partner, Core Scientific, went bankrupt in 2022.
However, a combination of catastrophic events and a drop in hash prices finally caused NFN8 to collapse.
What’s next for NFN8?
Application for NFN8 strives to preserve any remaining value in the company while ensuring an orderly liquidation process aimed at preserving value and avoiding disorderly liquidation.
This process involves marketing a company’s assets to prospective bidders in hopes of achieving the greatest return for the stakeholders.
What does this mean for Bitcoin mining profitability?
Looking at the industry as a whole, the NFN8 situation simply reflects a growing trend of lower rewards for miners, who have become more reliant on Bitcoin’s market price and transaction fees to cover operating costs.
All of this goes back to the block subsidy halving in April 2024, which reduced the reward from 6.25. $BTC 3.125 per block $BTC. Over the past few months, hash prices have also fallen to a historic low of $33 per petahash per day, further increasing the pressure on miners.
However, one could argue that bankruptcies like NFN8’s actually bode well for the larger mining ecosystem. Because it helps move assets from so-called “weak” operators into the hands of more efficient operators.
Mining difficulty has recently decreased by 11%. It still costs about $87,000 to mine one Bitcoin, and transaction fees as a percentage of miner revenue will fall from 7% to 1% from 2024 onwards, making the picture much bleaker.
