As the bear market and rising energy prices keep cryptocurrency miners under pressure, crypto mining giant Argo Blockchain admits it is close to bankruptcy. The company is currently looking for ways to avoid filing for Chapter 11 bankruptcy in the US.
Argo Blockchain is on the verge of bankruptcy
In a statement released on Monday, Argo Blockchain, one of the world’s leading cryptocurrency miners, announced that it is close to bankruptcy. However, the company would like to avoid the famous Chapter 11 of the United States bankruptcy law. It is reportedly “in advanced negotiations with a third party” to raise cash through “the sale of certain assets”.
To carry out its rescue plan, Argo Blockchain has hired the services of several experts in various strategic fields, such as the law firm McDermott Will & Emery LLP for the legal part, and Berkeley Research Group for financial advice.
Furthermore, the company explains that last week “some drafts were inadvertently published” on its website as a test page. As the drafts referred to a potential bankruptcy, Argo Blockchain’s stock was suspended from trading on the London Stock Exchange and Nasdaq.
The stock was reopened for trading yesterday. In fact, its share price has been in free fall for almost two years. Its last all-time high on the LSE was in February 2021 at £339.81, and it is now trading at around £4:
Figure 1 – Argo Blockchain share price on the London Stock Exchange
The state of the market is not helping
In an ideal scenario, cryptocurrency miners accumulate during downturns, only to sell back at market highs. But their ongoing expenses, starting with electricity, force them to sell off their work product, even when they would have preferred otherwise.
The problem arises when it is no longer profitable to mine, which can lead to the shutdown of the machines. This bear market phase can therefore be particularly difficult for these players, as the price of Bitcoin (BTC) has been falling for over a year now.
However, it should be noted that the difficulty of mining on the Bitcoin blockchain, which is influenced by the mining power brought to the network, remains on historical levels despite a small drop in recent days according to the site CoinWarz:
Figure 2 – Mining difficulty on the Bitcoin network
This metric does show the resilience of the network, which is also reflected in the computing power deployed. Indeed, although its evolution can be erratic over short periods, the hashrate is also on particularly high levels with nearly 310 ExaHash per second:
Figure 3 – Hashrate deployed on Bitcoin
To return to Argo Blockchain, its future remains uncertain for the moment, especially since the difficulties are not new. It is worth noting that the company raised $27 million last October, precisely to alleviate its financial problems
