As the crypto industry continues to face an unfriendly period, one of the industry’s largest Bitcoin miners Core Scientific is filing for chapter 11 bankruptcy.
The company is currently faced with an unfriendly economic crisis as its stock continues to plummet, which saw it down to 98% this year, due to the fall in crypto prices as well as the rising energy bills that have made mining a much harder business.
Although the company is still generating positive cash flow, the cash is not sufficient to repay the financing debt owed on equipment it was leasing.
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Its latest move to file for bankruptcy will see the crypto-mining platform as the first publicly listed company to file for bankruptcy, although it revealed plans to continue to mine bitcoin.
Last week, before it filed for bankruptcy, investment bank B Riley, a top lender to the firm, proposed a $72 million financing plan to enable the company to avoid bankruptcy.
The investment bank, which has an outstanding loan of $42 million with Core, said that its proposed new financing will be on favorable terms, providing more than two years of runway for the company to achieve profitability.
The bank further disclosed via a statement that the vast majority of Core Scientific’s issues are self-imposed which can only be corrected in conjunction with an open, transparent discussion and ongoing participation with its creditors and equity holders.
In October 2022 after its shares plummeted, Core scientific (CORZ) signaled that it may have to file for bankruptcy if its financial conditions continue to worsen.
Reports disclose that after this warning, its shares plunged to 77%. Core Scientific’s recent woes are attributed to the unfriendly state of the Bitcoin mining industry, as well as the high electricity bills.
Bitcoin, which touched an all-time high of almost $70,000 in November last year, making it the world’s largest cryptocurrency by market value has drastically slumped, which saw it drop to below $20,000 in June.
Since then, it has continued to stay below the $20,000 level, with Bitcoin currently trading at $16,860 which has seen miners struggle to break even.
Meanwhile, Core Scientific isn’t the only crypto firm negatively impacted by this upheaval, as several other crypto-mining companies have filed for bankruptcy.
Greenidge Generation, a vertically integrated crypto miner, reported second-quarter net losses of more than $100 million in August 2022 which forced it to “pause” its plans to expand into Texas, while, Compute North, which provides hosting services and infrastructure for crypto mining, filed for Chapter 11 bankruptcy in Sept.
Also, the recent FTX saga has further worsened the already troubled crypto industry as its collapse has heightened the volatility in crypto assets.
Analysts have predicted that it will take quite some time before the crypto market touches Nov 2021 levels which saw Bitcoin rise to $64,950, while noting that as long as uncertainty persists, the market will remain range-bound and bearish.