Core Scientific, an American bitcoin mining company, has filed for Chapter 11 bankruptcy in Texas.
The development comes against the backdrop of a long crypto winter and a weak BTC price, which has fallen further due to the bankruptcy of FTX.
Core Scientific’s involvement with Celsius
Core Scientific had a market capitalization of nearly $73.6 million at press time. The 52-week chart shows a staggering price decline of 98%. However, according to Yahoo Finance, its operating cash flow over the past 12 months is positive at $198.94 million. Despite the good cash flow, the funds are not sufficient to meet the financing obligations.
Most of this debt relates to mining equipment leases.
It is reported that after filing for bankruptcy, the company is able to avoid complete liquidation. As a result, business can continue as usual – but negotiations are ongoing with creditors. The company previously hinted at possible bankruptcy in an SEC statement in October.
For the past two months, while Core has temporarily halted debt repayments, it has issued a warning nonetheless. It informed its shareholders that they risked losing all of their investments. The reason was the bankruptcy of Celsius and its subsidiaries, which Core Scientific cited in its statement as the cause of its financial difficulties.
Due to the associated impact, as well as the crypto market downturn in May, Celsius stopped accepting customer withdrawals and filed for Chapter 11 bankruptcy in July 2022. Since then, the crypto lender has been trying to to attract potential buyers for its retail and mining businesses.
Higher Costs, Falling Profits: Bitcoin Price Is Too Low
Since last year’s peak, the price of BTC has lost around 75%. According to CoinGecko, the major cryptocurrency was trading within a 24-hour trading range of $16,781 and $17,026 at press time.
Additionally, according to Glassnode, December mining difficulties were only 3.5% lower than their all-time high. This suggests that weak price action and high difficulty continue to eat away at mining profits.
The mining company also acknowledged in its October report that the continued decline in the price of Bitcoin, rising utility bills, and an increase in the hash rate of the entire BTC network have had a negative impact on its operational performance and liquidity in many States.
Competitors report declining sales
Northern Data, a provider of high-performance computing (HPC) infrastructure and bitcoin mining rigs, recently announced that it mined 2,614 BTC between January and the end of November 2022. However, due to the drop in value of the coin , revenue fell nearly 15% from the prior month.
Another mining company, Riot Blockchain, reported losses of more than $30 million for the third quarter. According to Roth Cash Partners analyst Darren Aftahi, despite a net loss of $36.6 million, the company will weather a tough market thanks to its strong capital base.
Hat 8 Mining Corp. a company that also mines BTC reported an $18.6 million drop in revenue in the third quarter of 2022 from a year earlier.
Short sellers reportedly paid more attention to Hut 8 Mining and Riot Blockchain this year. Riot Blockchain is one of the largest publicly traded operators in the United States.
Finally, Marathon Digital Holdings Inc. also suffered a decline in its share price with a net loss of $75.4 million last quarter. Marathon Digital Holdings announced an $80 million investment in Compute North, which filed for bankruptcy in September.
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