Early Wednesday morning, Core Scientific, the world’s largest Bitcoin mining company, is filing Chapter 11 bankruptcy in Texas, as per a person who knows the company’s finances. The company has taken this stand after a year-long plunge in cryptocurrency and ever-surging energy prices.
Core Scientific undertakes the mining of Proof-of-Work of cryptocurrencies like Bitcoin. Data centers across the country power the mining process. Highly specialized computers compute complicated cryptos algorithms that verify the transaction’s authenticity while simultaneously creating new crypto tokens. The mining process involves expensive equipment and a technical understanding of algorithms and uses tremendous electrical power.
The company’s market capitalization fell from $4.3 billion in July 2021 to $78 million at the end of trading on Tuesday after it went public through SPAC or Special Purpose Acquisition Vehicle. From last year the stocks have dropped down to more than 98%.
Although the company is generating a positive cash flow, unfortunately, it isn’t sufficient to repay financial debts on the equipment that is leased to it, as per a person familiar with the ground reality of the company. This source, who requested anonymity to discuss private business concerns, said that the company would not go into liquidation but would carry on as usual while negotiating a solution with senior security noteholders, who control most of the company’s debt.
The company had announced while filing in October that stockholders might lose almost all of their investments. However, this may not be the case if the company happens to recover. The structuring of the company’s convertible note holder allows ordinary stockholders to retain their holdings if the business climate for bitcoins improves. Furthermore, it noted that the creditors could file a lawsuit against them if they fail to make the late October or early November debt payment.
Although Core mints many cryptos, it gives more preference to Bitcoin, as they had witnessed an all-time high of more than $69,000 in November 2021, to around the current price trend of $16,800. The loss in the valuation of Bitcoin, coupled with ever-growing competition amongst miners and increasing energy prices, is eating through their profits.
The Austin, a Texas-based miner that has operations in North Dakota, North Carolina, Georgia, and Kentucky, claimed in a filing in October that “operating performance and liquidity have been severely impacted by the prolonged decrease in the price of bitcoin, the increase in electricity costs,” as well as “the increase in the global bitcoin network hash rate,” which is a term used to describe the amount of power needed by miners when mining in the Bitcoin network.
When Celsius, one of the crypto lenders and Core’s customers, filed for bankruptcy in July, it had a ripple effect on it. There was a lot of strain on Core’s balance sheet as Celsius’ debts were wiped out as it underwent bankruptcy proceedings.
Core, amongst the top North American hosts and producers of blockchain infrastructure and miners of digital assets, is one of many facing such challenges.
Marathon Digital Holding had a risk exposure of roughly $80 million to Compute North. Unfortunately, Compute North, which provided infrastructure for crypto minings and hosting services, had filed for bankruptcy protection in September.
Meanwhile, the vertically integrated crypto miner Greenidge Generation put its intentions to expand into Texas on hold and posted second-quarter net losses of more than $100 million in August. And after announcing on October 31 that its discretion to fund $27 million with a “strategic investor” would no longer take place, Argo’s stock fell 60%.
- Published By Team Genuine Reporter