Two Bitcoin Miners Chose Debt over Dilution To Fund AI Expansion

One went through a decentralized lending protocol with no company on the other side of the trade. The other went through a bespoke hedge structure built by a single crypto-native lender. Both are chasing the same thing: cash for an AI infrastructure buildout, without giving up Bitcoin exposure or diluting shareholders to get it.

The onchain route

Hyperscale Data (GPUS), a Las Vegas-based company that mines Bitcoin and operates AI data centres, disclosed on 3 Aug that it had roughly $30mn outstanding against its Bitcoin treasury through Morpho, a decentralized lending protocol. The loan is overcollateralized: Hyperscale Data pledged Bitcoin worth more than it borrowed, the standard cushion that protects a lender if the price falls. It carries a variable rate of about 4.9%, and because the company still owns the pledged Bitcoin rather than selling it, it keeps what's known as economic exposure, meaning it still benefits if Bitcoin's price rises, provided it maintains the required collateral ratio, enough Bitcoin value pledged against the loan, and avoids a forced sale.

Before selling about 100 BTC outright on 30 Jul to fund construction directly, the company held just over 1,000 BTC, worth roughly $66.5mn at today's price of about $64,500. The Morpho loan covers what it kept: rather than sell more coins, Hyperscale Data is borrowing against the remainder. Both moves are funding the same target, a Michigan AI data campus tied to a 10-year master services agreement with an unnamed neo-cloud provider that starts at 20 megawatts and could grow to 52 megawatts, worth more than $1.2bn at its current scope and above $3bn if the customer takes the full option.

Executive Chairman Milton "Todd" Ault III has said plainly why the company chose debt over equity: Hyperscale Data's stock trades near $0.11 to $0.12 a share, deep in penny-stock territory and well below what management considers the value of its combined Bitcoin and cash holdings, so issuing new shares at that price would badly dilute existing shareholders, shrinking everyone's slice of the company without a matching increase in what it's worth. Borrowing against Bitcoin instead, as Sandmark has tracked through Morpho's rise as institutional onchain credit infrastructure this year, avoids that entirely, at the cost of a liquidation risk if Bitcoin's price falls far enough.

The bespoke route

PowerCompute (PWCM), the Tampa-based Bitcoin miner formerly known as LM Funding America, took a messier path to a similar place. On 3 Aug it closed an $18.1mn facility with ChainFi Inc, a New York crypto lender doing business as Arch Lending, founded in 2024 and backed by $75mn in seed funding, which custodies client assets through Anchorage Digital, a federally chartered bank. The loan is secured by 307 BTC from PowerCompute's treasury, structured as what the lender calls a "collar loan": a Bitcoin-backed loan with built-in price limits. As long as Bitcoin's price stays within an agreed range, the loan simply renews every 30 days at 2% interest. If the price falls too far below the agreed floor, PowerCompute can walk away and forfeit the collateral, repay the loan outright, or put up more Bitcoin to keep it running.

The facility replaced three older, more expensive debts: an $11mn loan from Galaxy Digital and two loans totalling $7mn from private lenders SE and AJ Liebel, all originally taken out to buy PowerCompute's Oklahoma and Mississippi mining sites. That means Galaxy, one of the two companies that spent this week explaining its own Bitcoin-and-AI-infrastructure pivot to investors, was also on the other side of a small miner's balance sheet as a lender being paid off.

The path there was not smooth. PowerCompute first signed a four-day bridge loan with Arch on 27 Jul, carrying a 31 Jul maturity, then went quiet: no SEC filing and no press release for several days after the bridge came due, while the permanent facility's terms were still being finalized. The final numbers, when they landed, showed the 307 BTC pledged as collateral came to roughly 97% of the company's entire Bitcoin treasury as of its last reported balance, a full commitment of the one asset that got it this financing in the first place.

Why now

Neither company is short of alternatives on paper. Both could sell Bitcoin outright, both could issue new shares, and both chose to borrow against the coins instead. It's the same driver behind smaller miners' pivot toward AI hosting all year: the equity market isn't pricing either company's assets generously enough to make new share sales attractive, and a bank won't lend against Bitcoin the way a crypto-native lender will. What's different is the mechanism. Hyperscale Data's loan runs on public, permissionless smart contracts with no counterparty to negotiate with. PowerCompute's runs through a single lender, building custom hedge terms loan by loan.

Both are also the same bet in reverse if it goes wrong. A big enough drop in Bitcoin's price, or an AI contract that slips or falls through, could force the sale of the exact treasury both companies just committed not to touch – currently neither would have much else left to fall back on.

Sandmark contacted Hyperscale Data and PowerCompute for comment on the details in this article, and had not received a response as of publication.