Bitcoin Miners Raise $11 Billion in Convertible Debt Amid AI Expansion

According to Cointelegraph, Bitcoin miners have secured $11 billion in convertible debt over the past year as they shift towards artificial intelligence data centers. This financial maneuver follows the April 2024 Bitcoin halving, which reduced the block reward by 50%, prompting miners to explore alternative revenue streams. TheMinerMag reports that 18 convertible bond deals were completed post-halving, with major mining companies such as MARA, Cipher Mining, IREN, and TeraWulf each raising $1 billion through individual bond issues. Notably, some of these offerings featured coupons as low as 0%, indicating investors' willingness to forgo interest payments for potential equity gains. The average size of convertible bond issues has more than doubled compared to the previous year, where most ranged between $200 million and $400 million. This shift reflects the mining industry's diversification into AI data centers to mitigate revenue losses following the halving. Miners face ongoing challenges due to tokenomics, trade policies, supply chain disruptions, and escalating energy costs. A recent report from investment manager VanEck highlights a 500% surge in miner debt over the last year, totaling $12.7 billion. Analysts Nathan Frankovitz and Matthew Sigel from VanEck emphasize that these debt levels underscore a fundamental issue within the mining sector—substantial capital expenditures on mining hardware that require frequent upgrades. Historically, miners have relied on equity markets rather than debt to finance these significant capital expenditures, which VanEck analysts describe as a "melting ice cube." Meanwhile, Bitcoin's network hashrate continues to climb, necessitating increased computing and energy resources from miners. In October, U.S. Energy Secretary Chris Wright proposed regulatory changes to the Federal Energy Regulatory Commission (FERC) to enable data centers and miners to connect directly to energy grids. This initiative aims to allow energy-intensive operations to meet their power demands while serving as controllable load resources for the grid, thereby stabilizing the electrical infrastructure during peak demand and reducing excess energy during low demand.