Core Scientific, a Bitcoin (BTC) mining company that owns 10% of the global hashrate, has filed for Chapter 11 bankruptcy protection in the United States. The company finds itself in a critical situation due to an unfavorable market and is thus crumbling under debts, which are estimated at more than a billion dollars.
Core Scientific on the brink of bankruptcy
Core Scientificone of the largest Bitcoin (BTC) mining companies, just applied for protection under Chapter 11 relating to bankruptcy in the United States. As a reminder, the company holds 10% of the hashrate BTC mining world.
This procedure, commonly used, aims to allow a company to continue its activity while postponing the maturity of its payments and its debts. Once the request has been filed, a dedicated committee supervised by the American authorities then has 120 days to validate or refuse the request in agreement with the competent court.
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A decision, however, hardly surprising, insofar as Core Scientific had already warned of its critical fragility and a possibility of imminent bankruptcy. in a statement on October 26 with the United States Securities and Exchange Commission (SEC).
Following this first announcement, the price of its share on the stock exchange (CORZ) had already sunk into a dizzying fall. up to lose 90% of its value within 2 weeks :
CORZ stock price from December 2021 to present
Indeed, Core Scientific is listed on the NASDAQ stock exchange since its merger with SPAC Power & Digital Infrastructure Acquisition (ticker XPDBU) on January 26. However, its share price has been able to observe downward continuity since its inception, due in particular to an unfavorable market.
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What are the reasons for this decision ?
According to information revealed by CNBC, Core Scientific would still be able to provide positive cash flow, but however less than what is needed to reimburse its very many BTC mining machines. Sure enough, the company, like many miners at that time, had invested heavily during the cyclical BTC rally of 2021 in order to maximize its hashrate.
In view of the documents filed by Core Scientific as part of its application for protection under Chapter 11, the company was $1 billion in debt as of last October. note that BlockFithe cryptocurrency lender also under Chapter 11 protection, is among Core Scientific’s creditors.
Unfortunately, cryptocurrency miners find themselves in double trouble : on the one hand the fall in the price of BTC (which has lost 64% over the last 12 months), and on the other hand the increase in the price of electricity. Consequently, they find themselves less rewarded for their mining activity while having heavier operating costs.
This is why Core Scientific is not the only company affected: last July, Celsius Mining had also placed itself under Chapter 11, quickly joined by Compute Northwho did the same at the end of September.
In order to provide a more accurate idea of the situation Core Scientific currently faces, its market capitalization reached $14.32 billion in November 2021, and is now only worth $79 million.
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Sources: CoinDesk, TradingView
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