Core Scientific, one of the largest bitcoin miners registered in the US, is filing for bankruptcy.
The Texas-based company filed for bankruptcy on Wednesday. The firm said that it would continue mining bitcoin whilst it works out a restructuring deal with creditors and lenders.
The bankruptcy of Core Scientific is another major blow to the crypto industry, which has been in trouble since the beginning of this year. Financial commentators are calling it the “crypto winter.”
Core Scientific, from boom to bankruptcy
Core Scientific emerged as a startup in 2017. It was co-founded by entrepreneur and venture capitalist Darin Feinstein and Aber Whitcomb, a former Myspace chief technology officer (CTO) and co-founder.
The company began trading in January after a deal was struck with an acquisition company backed by BlackRock. The firm had facilities in five US states, where its computers would generate new units of cryptocurrency.
However, Core Scientific’s stock has fallen 98 percent this year, and the firm filed for Chapter 11 bankruptcy protection in Texas.
At its peak in April, Core Scientific’s market value reached approximately $3 billion, but this value has fallen to around $100 million.
According to a statement issued by the company, it is in the process of conducting “a comprehensive review of potential alternatives and exhaustive discussions with various company stakeholders.”
The firm expects to negotiate a restructuring support agreement with the Ad Hoc Noteholder Group, which represents over half of the holders of its convertible notes.
Core Scientific further explained that “the filing of these cases was necessitated by a decline in the Company’s operating performance and liquidity suffering from the prolonged decrease in the price of bitcoin, the increase in electricity costs necessary to power the Company’s data centers, and the failure by [some] of its hosting customers to honor their payment obligations.”
“In response to these factors, the Company has actively taken steps to decrease monthly costs, delay construction expenses, reduce and delay capital expenditures and increase hosting profitability,” the firm concluded.
The price of every major cryptocurrency fell in the first half of this year after the collapse of stablecoins TerraUSD and LUNA. Stablecoins are meant to stabilize the cryptocurrency market by remaining immune to volatile changes in value.
Over the course of the year, Bitcoin, the market’s most important digital currency, has also been hit by sharp drops in value. The value of Bitcoin can expand and contract drastically. On November 10, 2021, it reached an all-time high of $69,045, whereas now a single bitcoin is worth substantially less at around $16,800.
Although Core Scientific’s bankruptcy will not have as meteoric an effect as the collapse of FTX, it is listed on the Russell 2000 Index, and its collapse will affect crypto market investors.