- Crypto mining giant Core Scientific plans to file for Chapter 11 bankruptcy according to a report.
- The move comes after market events have made the company’s cash flow insufficient to meet debt obligations.
The Bitcoin mining industry has come under a lot of strain on the back of plunging prices in the crypto market. Core Scientific, one of the largest publicly traded crypto mining companies in the U.S., has become the latest victim of the market’s volatile status.
A CNBC report reveals that Core Scientific intends to file for chapter 11 bankruptcy protection in the U.S. state of Texas. Citing persons familiar with the Core’s finance, CNBC notes that the move is due to the company’s cash flow not being enough to meet debt obligations.
At present, Core Scientific still generates positive cash flow, according to the person. But the cash flow is not sufficient to repay the financing debt owed on equipment it uses on lease.
Meanwhile, the bankruptcy filing plans will not disrupt the operation of Core Scientific mining operations. The person notes that the company does not plan to liquidate. It will continue to operate normally while reaching a deal with senior security noteholders who hold the bulk of the company’s debt.
The move comes on the back of several internal and external events that have compressed Core’s profit margins. One of these traces back to the bankruptcy of crypto lender Celsius which was its customer. The wipeout of Celsius’ debt put a strain on Core’s balance sheet.
Similarly, the plunging price of cryptocurrencies, the rising cost of energy, and increased competition among miners have affected the company. The publicly listed company stated this in an SEC filing in October where it first raised the possibility of filing for bankruptcy.
Core Scientific has seen its shares plunge 98 percent in the last year. Its valuation has also dropped from its $4.8 billion July 2021 SPAC public listing high to around $78 million at present.
Will miners’ distress pull down the price of BTC?
Core Scientific is not the only crypto miner under strain due to the current market conditions. Hosting service and crypto mining infrastructure provider Compute North filed for chapter 11 bankruptcy in Sept.
The filing affected Marathon Digital Holdings, another miner, that reported an $80 million exposure to Compute Compute North. Similarly, Greenidge Generation reported second-quarter net losses of over $100 million in August. The vertically integrated miner said it was pausing plans to expand into Texas.
While BTC’s price plunge has contributed to the strain on the miner, the miners’ trouble could contribute to more downside in the asset’s market. BTC currently trades at around $16,873, up 0.42% in the last 24 hours at press time.
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