- According to reports, Core Scientific has filed for Chapter 11 bankruptcy in Texas as a result of declining sales and BTC pricing.
- In order to continue operating, Core Scientific had to sell 9,618 BTC in April as a consequence of a protracted bearish trend.
One of the world’s biggest publicly traded bitcoin miners, Core Scientific, opted for Chapter 11 bankruptcy protection as this year’s drop in cryptocurrency prices struck yet another victim.
According to the article released late on Tuesday, the company will not liquidate but will instead seek bankruptcy protection in Texas early on Wednesday morning. It will also carry on as usual while negotiating with senior security noteholders.
As of the close of trade on Tuesday, Core had a market value of $78 million, down from a $4.3 billion valuation in July 2021 when the business went public via a special purpose acquisition vehicle, or SPAC. Over the past year, the stock has decreased by more than 98%.
According to Core Scientific, it had between 1,000 and 5,000 creditors, with financial services company B. Riley being its biggest creditor, owing $42.4 million. B. Riley had just last week suggested $72 million in additional capital, arguing that bankruptcy was not the solution to Core Scientific’s issues.
Bitcoin miners have come under much criticism due to the decline in profitability they experienced due to falling cryptocurrency prices and rising energy costs.
Even though the business continues to have positive cash flows, the earnings are insufficient to satisfy the operational expenses, including the cost of leasing new equipment for Bitcoin mining. However, Core Scientific has no plans to liquidate and would keep operating its mines.
Holders of Core’s common shares could experience “a total loss of their investment,” as stated in a filing from October, but if the industry as a whole rebounds, that may not be the case. The agreement reached with Core’s convertible note holders is set up so that common equity holders could not lose everything if the economic climate for bitcoin actually boosts.
According to CNBC, the price of Core’s token has fallen from an all-time high of almost $69,000 in November 2021 to roughly $16,800. Core primarily mints bitcoin. Its profit margins have been reduced as a result of that value decline, increased rivalry among miners, and rising energy prices.