Core Scientific, a Bitcoin (BTC) mining company that holds 10% of the world’s hashrate, has filed for Chapter 11 bankruptcy protection in the US. The company is in a critical situation due to an unfavourable market and is therefore burdened with debts estimated at more than $1 billion.
Core Scientific on the verge of bankruptcy
Core Scientific, one of the largest Bitcoin (BTC) mining companies, has filed for Chapter 11 bankruptcy protection in the US. As a reminder, the company holds 10% of the world’s BTC mining hashrate.
This procedure, commonly used, aims to allow a company to continue its activity while postponing its payments and debts. Once the application is filed, a dedicated committee supervised by the US authorities then has 120 days to approve or deny the application in accordance with the relevant court.
The decision comes as little surprise, however, as Core Scientific had already warned of its critical fragility and the possibility of bankruptcy in an October 26 filing with the US Securities and Exchange Commission (SEC).
Following this initial announcement, its share price on the stock exchange (CORZ) had already plummeted to the point of losing 90% of its value in the space of 2 weeks:
CORZ share price from December 2021 to today
Core Scientific has been 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 seen a steady decline since its inception, due in part to an unfavourable market environment.
What are the reasons for this decision?
According to information revealed by CNBC, Core Scientific is still able to provide positive cash flow, but less than what is needed to pay off its many BTC mining machines. Indeed, the company, like many miners at the time, had invested heavily during the 2021 BTC cyclical rally to maximise its hashrate.
According to Core Scientific’s Chapter 11 filings, the company was $1 billion in debt as of last October. Note that BlockFi, the cryptocurrency lender also under Chapter 11 protection, is among Core Scientific’s creditors.
Unfortunately, cryptocurrency miners find themselves in a double bind: on the one hand, the drop in the price of BTC (which has lost 64% over the past 12 months), and on the other hand, the rise in the price of electricity. As a result, they find themselves less rewarded for their mining activity while at the same time having increased operating costs.
This is why Core Scientific is not the only company affected: in July, Celsius Mining also placed itself under Chapter 11, quickly joined by Compute North, which did the same at the end of September.
To give a clearer picture of the current situation facing Core Scientific, its market capitalisation was $14.32 billion in November 2021, and is now worth only $79 million.
