PowerCompute, a company operating in Bitcoin mining and high-performance computing, has closed its Bitcoin-backed loan agreement. Instead of accumulating Bitcoin through leverage, the company will use its assets as working capital.
PowerCompute announced that it has fully closed its Bitcoin-backed loan agreement with Arch Lending. Approximately 267.3 Bitcoins out of the 307 Bitcoins provided as collateral were sold to repay the loan.
According to the company’s statement, the funds raised were used to repay a $21.89 million loan principal, approximately $118,582 in interest, and $440,122 in transaction fees. After the debt was settled, the remaining approximately 39.6 Bitcoin held as collateral was returned to PowerCompute.
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It was specifically stated that the sale did not result from a margin call or an unscheduled forced liquidation. The transaction was explained as having been conducted by mutual agreement between the parties during the September 24th renewal period predetermined in the loan agreement. Therefore, the Bitcoin sale reported in the news should not be interpreted as the company panicking and selling off all its assets on the open market.
With this move, PowerCompute reduced its secured debt from $19.4 million on June 30 to approximately $1.25 million. The company reported that as of September 25, it held approximately 62 Bitcoin, which, at the $84,500 price used in the announcement, was worth approximately $5.2 million.
The management’s new strategy is also noteworthy. PowerCompute plans to go down the path of treating Bitcoin not as a leveraged treasury asset to be grown through debt, but as working capital that can be used for equipment purchases, operations, and company growth.
This development has brought the risks of publicly traded companies’ Bitcoin strategies back into focus. While Bitcoin-backed debt can provide capital during bull runs, it can also expose companies to additional collateral requirements or selling pressure during price declines.
*This is not investment advice.