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Bitcoin miner Core Scientific files for bankruptcy, will continue mining

Core Scientific’s 104 megawatt Bitcoin mining data center in Marble, North Carolina

Carey McKelvey

Core Scientific, one of the largest publicly traded crypto mining companies in the United States, filed for Chapter 11 bankruptcy protection in Texas early Wednesday morning, according to a person familiar with the company̵[ads1]7;s finances. The move follows a year of falling cryptocurrency prices and rising energy prices.

Nuclear mines for proof-of-work cryptocurrencies like bitcoin. The process involves running data centers across the country, packed with highly specialized computers that crunch mathematical equations to validate transactions while simultaneously creating new tokens. The process requires expensive equipment, some technical know-how and a lot of electricity.

Core’s market value had fallen to $78 million by the end of trading on Tuesday, down from a valuation of $4.3 billion in July 2021 when the company went public through a special purpose acquisition company, or SPAC. The stock has fallen more than 98% in the past year.

The company continues to generate positive cash flow, but the cash is not sufficient to repay the financing debt on equipment it leases, according to a person familiar with the company’s situation. The company will not liquidate but will continue to operate normally while reaching an agreement with senior secured bondholders, who sit on the bulk of the company’s debt, according to this person, who declined to be named to discuss confidential company matters.

Core had previously said in an October filing that holders of common stock could suffer “a total loss of their investment,” but that may not be the case if the overall industry recovers. The agreement with Core’s convertible bondholders is structured in such a way that if the business environment for bitcoin actually improves, equity holders may not be completely wiped out. The company also revealed it would not make debt payments due in late October and early November – and said creditors were free to sue the company for non-payment.

Core, which primarily produces bitcoin, has seen the price of the token fall from an all-time high above $69,000 in November 2021 to around $16,800. it is profit margins.

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The Austin, Texas-based miner, which has operations in North Dakota, North Carolina, Georgia and Kentucky, said in its October filing that “operating results and liquidity have been severely impacted by the prolonged decline in the price of bitcoin, the increase in electricity costs, ” as well as “the increase in the global hash rate of the bitcoin network” – a term used to describe the computing power of all miners in the bitcoin network.

Crypto lender Celsius, which filed for bankruptcy protection in July, was a core customer. When Celsius’ debt was wiped out in bankruptcy proceedings, it put a strain on Core’s balance sheet, in yet another example of the contagion effect rippling through the crypto sector this year.

Core – which is one of the largest providers of blockchain infrastructure and hosting, as well as one of the largest digital asset miners, in North America – is not alone in its struggles.

Compute North, which provides hosting services and infrastructure for crypto mining, filed for Chapter 11 bankruptcy in September, and another miner, Marathon Digital Holdings, reported an $80 million exposure to Compute North.

Meanwhile, Greenidge Generation, a vertically integrated crypto miner, reported a second-quarter net loss of more than $100 million in August and “paused” plans to expand into Texas. And shares of Argo plunged 60% after announcing on October 31 that its plan to raise $27 million with a “strategic investor” was no longer happening.

Bitcoin miner Core Scientific files for bankruptcy, will continue mining

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