• BlockFi and Celsius were two high-profile companies that combined crypto lending and crypto mining.
• Both companies have since gone bankrupt, and hundreds of billions of dollars were incinerated.
• The failure of these companies could provide valuable lessons for future entrepreneurs.
Crypto is a rapidly growing industry and has become a major part of the global economy. The past year has been particularly tumultuous, with the disastrous fallout of crypto prices leading to the popularization of the word “Contagion”. This has been especially true for the crypto mining industry, which has seen numerous companies go bankrupt and hundreds of billions of dollars incinerated. Two of the most high-profile companies to suffer this fate were BlockFi and Celsius, both of which had combined crypto lending and crypto mining operations.
BlockFi announced its mining operations in May 2021 in the form of a partnership with Blockstream and its long-standing mining unit. Although the exact amount of hash rate that BlockFi had managed through Blockstream has not been made public, the company clearly viewed mining as a complement to its financial service offerings. Celsius, on the other hand, had invested heavily in bitcoin mining, spending $500 million in November 2021. Both companies, however, have since gone bankrupt, leaving investors with significant losses.
What can be learned from the failure of BlockFi and Celsius? For starters, it is important to note that the crypto mining industry is highly interconnected and vulnerable to external factors. Companies should take steps to minimize their exposure to market risks, as well as ensure that their business models are sound and that their financials are in order. In addition, businesses should be aware of the potential for conflict of interest when combining crypto lending and crypto mining, as this could lead to a conflict between the interests of the company and its customers.
Finally, it is important to remember that the crypto industry is constantly evolving and that it is important to stay abreast of the latest trends. Companies must be prepared to adjust their strategies in order to stay competitive, as well as take advantage of new opportunities. With the right approach, businesses can avoid the pitfalls that BlockFi and Celsius suffered, and continue to contribute to the growth of the crypto industry.