Bitcoin miner Argo Blockchain Plc warned on Monday that it may be forced to shut down its business operations after a deal to raise $27 million from a strategic investor fell through.

Argo said earlier this month that it had signed a letter of intent to sell 87 million shares to the investor as it wanted to ease liquidity pressures. However, the London-based firm did not say why the fundraising deal was called off.

The Bitcoin miner said it is now working to secure other deals to provide working capital for the next 12 months. On Monday, Argo said that he raised about $5.6 million through the sale of almost 4,000 new Bitmain miners and that he is considering other avenues of funding.

“If Argo is unsuccessful in completing any additional financing, Argo would become cash flow negative in the near term and would have to scale back or cease operations,” Argo said in a statement to the London Stock Exchange.

The shocking news sent shares of the company down as much as 72% and trading at £8.75 at 11am in London on Monday. Argo’s shares have fallen by around 90% this year as falling crypto prices hit the mining sector.

What are Bitcoin miners fighting for?

This year, the profits of mining companies have plummeted due to falling cryptocurrency prices and rising costs. Earnings reports for the third quarter clearly showed the troubles in the industry, with the major publicly traded Bitcoin miners in the US posting more than $1 billion in combined losses.

Several Bitcoin miners, who expanded their operations in 2021 to capture more profits, are now struggling as cryptocurrency values ​​decline.

Historically, the biggest cost to miners has been their energy source. As energy prices surged, while the price of Bitcoin plummeted more than 70% from its all-time high last November, most miners found themselves unprofitable.

Crypto miners massively invested in new mining infrastructure to get a share of the huge profits. However, Bitcoin’s hashrate, which measures the total computational power used to secure the network, has been on the rise with more miners coming online. By design, the Bitcoin network has been increasing in difficulty, making it harder for miners to earn rewards.

The increasing difficulty means that the total income of the mining industry is much lower compared to the previous year and the competition for this income has also increased.

Last week, Bitcoin miner Core Scientific raised the possibility of filing for bankruptcy protection in a statement filed with the Securities and Exchange Commission. The Miner further revealed that it will not make its debt payments due in late October and early November. Blockchain.News reported on the matter.

In September, crypto mining data center Compute North filed for Chapter 11 bankruptcy after reports surfaced that it owed $500 million to more than 200 creditors.

Image source: Shutterstock