Core Scientific, one of the largest publicly traded cryptocurrency mining companies in the United States, filed for bankruptcy on Wednesday, December 21st. We are talking about the decrease in the value of cryptocurrencies and the increase in energy prices.
It’s a new earthquake in the crypto world. Core Scientific, infrastructure supplier to blockchains and one of America’s largest cryptocurrency miners, is going bankrupt. The company filed for Section 11 bankruptcy protection this morning. Which allows him to maintain a minimum of activity.
Like most mining companies, Core Scientific focuses on cryptocurrencies that operate according to the model proof of work. Literal proof of work. The problem is that this activity requires data centers and specific computing equipment to run at full speed. Obviously, this type of cryptocurrency, of which Bitcoin is one, is extremely energy-intensive and very expensive.
However, according to an unnamed CNBC source, the company is still generating positive cash flow, but it is still insufficient to pay off the company’s debt on the equipment. Note that in October 2022, Core Scientific stated that its shareholders could lose their entire investment. The lights have therefore been red for a while. A situation that, according to the company, was connected to Bitcoin’s dizzying fall (note: – 52,200 dollars in 1 year), the increase in energy prices and increasingly fierce competition. Thus, the cocktail has continuously reduced Core Scientific’s profit margins, to the point that the company is teetering on the wrong side of the barrier.
If Core Scientific has fallen, it gives an idea of the state of the industry. All companies in the sector are affected, directly or indirectly. Core Scientific locked itself into a downward spiral from July 2022, when Celsius filed for bankruptcy. The company, a cryptocurrency lender, owed money to Core Scientific, but bankruptcy proceedings erase the debt. As a result, things got worse for Core Scientific.
It should also be mentioned that several cryptocurrency mining companies have already given up. Compute North and Marathon Digital Holdings, among others, filed for Section 11 bankruptcy protection as early as September 2022. And companies that escape are doing a little better. In a press release, the giant Argo Blockchain also acknowledges that it is on the verge of collapse, as its stock market value fell by almost 60% last October due to fundraising… to avoid bankruptcy.
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