A Bitcoin mining giant is bankrupt

A Bitcoin mining giant is bankrupt

Core Scientific, one of the largest publicly traded cryptocurrency mining companies in the United States, filed for bankruptcy on Wednesday, December 21. In question, the fall in the value of cryptocurrencies and the rise in energy prices.

It is a new earthquake in the world of crypto. Core Scientific, infrastructure provider for block chains and one of America’s largest cryptocurrency miners, is going out of business. The company filed for Section 11 bankruptcy protection this morning. Which allows him to maintain a minimum activity.

Reduced profit margins

Like most mining companies, Core Scientific focuses on cryptocurrencies that operate on the model of proof of work. Literally proof of work. The problem is that this activity requires data centers and specific IT equipment running at full speed. Clearly, 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 debts on the equipment. Note that Core Scientific declared in October 2022 that its shareholders could lose their entire investment. The lights have therefore been red for a while. A situation linked, according to the company, to the vertiginous fall of Bitcoin (note: – 52,200 dollars in 1 year), the increase in energy prices and ever fiercer competition. Thus, the cocktail continually reduced Core Scientific’s profit margins, to the point of tipping the firm on the wrong side of the fence.

It affects the master

If Core Scientific has fallen, that gives some idea of ​​the state of the industry. All companies in the sector are affected, directly or indirectly. Core Scientific itself locked itself in a downward spiral from July 2022, when Celsius filed for bankruptcy. The company, a cryptocurrency lender, owed money to Core Scientific, but the bankruptcy procedure erases the debts. 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 it fare little better. In a press release, the giant Argo Blockchain also recognizes that it is on the brink of collapse as its stock market value fell by nearly 60% last October due to fundraising… to avoid bankruptcy.

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