How hedging strategies can help Bitcoin miners lower their cost of capital
How hedging strategies can help Bitcoin miners lower their cost of capital
Bitcoin miners can hedge their cash flow risks and lower their capital costs with mining derivatives.
Bitcoin mining is a capital-intensive business where having access to low-cost capital is critical for the success of an operation. Unfortunately, bitcoin miners’ cost of capital is significantly higher than that of companies from comparable sectors. This high cost of capital limits miners’ growth prospects and eats into their net incomes.
Luckily, not all hope is lost for capital-hungry bitcoin miners. This article analyzes the high cost of capital in the bitcoin mining industry and explains how cash flow hedging with derivatives can open up new capital-raising opportunities for these companies.