Bitcoin is a volatile cryptocurrency: a decrease in its price has led to the bankruptcy of one of its largest miners. Core Scientific Inc. joined a series of crypto companies to have filed for bankruptcy in 2022. The crypto winter has been especially hard on miners, as the industry is also affected by the economic and political situation in the world.
The company from Austin, Texas, provides around 10% of its computing power to support the Bitcoin network. With 243 thousand servers for Bitcoin mining and 143 thousand servers for self-mining, Core Scientific used to provide hosting services to the largest crypto miners.
Crypto: the bankruptcy of Core Scientific
Core Scientific filed a Chapter 11 bankruptcy petition with the court in the Southern District of Texas. It listed assets in the amount of 1.4 billion US dollars against its liabilities in the amount of 1.33 billion US dollars. Its shares had previously dropped by 98%. They decreased by another 40% on December 21 and now trade at around a tenth of a dollar.
During a Chapter 11 proceeding, a company can continue to operate while figuring out how to pay its creditors. Core Scientific declared its intention to negotiate a restructuring agreement with the holders of convertible bonds and continue providing mining and hosting services.
Miscalculation
Core Scientific has explained that the bankruptcy was caused by decreasing Bitcoin prices, growing energy costs, and the bankruptcy of one of its main customers — Celsius.
Core Scientific also went over the budget on construction to expand its mining operations. It owed around 275 million US dollars on equipment financing and wasn’t keeping to the payment schedule before filing for bankruptcy.
Core Scientific went public among some other mining companies in 2021. However, crypto prices have fallen, the crypto crisis and energy cost growth have affected the crypto industry, and many miners now have insufficient liquid funds.
Other bankrupt companies
Several crypto firms have filed for bankruptcy in 2022 due to the increased pressure of falling prices. Compute North Holdings Inc., a company providing data services to miners and blockchain companies, filed for bankruptcy in September, while Voyager Digital Ltd. did so in July. The FTX exchange initiated proceedings in November after alleged mismanagement. Its lender BlockFi Inc. was forced to do the same.
Greenidge Generation Holdings Inc., that used to be a major public miner in the United States, gave a warning about a potential bankruptcy on December 20. The company has entered restructuring negotiations with its lender, New York Digital Investment Group.
