Bitcoin Miner Core Scientific Continues to Mine As It Files for Bankruptcy
The crypto winter lingers in the air, and companies are crumbling beneath the pressure. Among those who have taken a major hit are Bitcoin mining companies, which owe more than $4 billion as a whole. Bitcoin miner Core Scientific owes the most, leading the way with $1.33 billion of liabilities compared to $1.4 billion of listed assets.
Core Scientific filed for bankruptcy. Core Scientific is only one of the many crypto companies to file for bankruptcy in recent months, joining FTX, BlockFi, and others that are finding it difficult to navigate the difficult economic environment. The decision came after a difficult year that saw rising energy prices and Declining cryptocurrency prices.
- The process of Bitcoin mining requires expensive equipment, technical know-how, and a large amount of electricity, which makes rising electricity prices devastating.
- The market capitalization of Core Scientific has fallen from $4.3 billion in July of 2021 to $78 million, with its stock falling over 98% in a single year.
- The company shares dropped an additional 40% after the bankruptcy announcement.
The company plans to keep mining. There is a significant financing debt owed on equipment Core Scientific was leasing, which it cannot pay back currently. However, the mining company still has a positive cash flow, which is why it has decided to continue operating normally instead of liquidating.
- The company is looking to reach a deal that can save it, but it previously said in an October filing that investors might lose everything they put into the company. In part, it is dependent on the recovery of the industry as a whole.
- Core Scientific has long made it known that they could not make debt payments, telling creditors that they were free to sue for nonpayment.
The decline in Bitcoin prices is a major problem for miners. The industry has always been competitive, but as Bitcoin continues to plunge from its peak of $69,000 to its current price of around $16,650, the struggle between miners has become that much more fierce. Combine that with rising energy prices, and it is a perfect to hurt mining companies.
Celsius, a cryptocurrency lender, also played a role in Core’s fall. When the lender filed for bankruptcy, it wiped out debts, which put a strain on Core Scientific since it was a customer of the mining company. It is part of the ripple spreading in the crypto space, with one fall impacting numerous companies.
- According to to Core Scientific, Celsius owes it $5.2 million.
- There has been a dispute between Celsius and Core over electricity costs under their mining agreement.
BlockFi, which filed for bankruptcy last month, also participated in a $54 million loan to Core Scientific used to secure equipment.
Bankruptcy loan approval for $37.5 million might save Core Scientific. After filing for bankruptcy, Core Scientific was approved for the loan from existing creditorsHowever, it is only on an interim basis, with final approval to occur in January. In the meantime, the company is remaining open to other options.
The creditors said they still have faith in the mining company, despite the difficult situation. However, it remains to be seen if they are just hoping things recover and they regain more of their initial investment.
Spencer Hulse is a news desk editor at Grit Daily News. He covers startups, affiliate, viral, and marketing news.