Core Scientific, a prominent publicly traded crypto mining company in the United States, has filed for Chapter 11 bankruptcy protection in Texas.
American crypto mining company Core Scientific, has applied for Chapter 11 bankruptcy protection in Texas. The development follows a protracted crypto winter and sluggish Bitcoin price movement, which was intensified by the FTX bankruptcy.
At the time of publication, Core Scientific’s market capitalization was around $73.6 million. Its 52-week change reveals a 98% drop. However, according to Yahoo Finance, the operational cash flow for the previous twelve months was positive at $198.94 million. Despite having strong cash flows, there is not enough money to cover all of the financing debt obligations.
According to reports, the business will avoid liquidation after filing for bankruptcy. In other words, operations would continue as usual while a compromise with the major creditors was being discussed. Notably, the company issued a bankruptcy warning in an October SEC statement.
In the previous two months, Core had issued a warning while temporarily suspending debt payments. It warned the owners of equity shares that they may lose all of their capital. This resulted from Celsius and its affiliates’ collapse, which Core Scientific stated in its petition as the reason for their financial concerns.
High Cost of Operations and Lesser Profits
The value of the company’s mined Bitcoin has decreased by nearly 75% from its peak last year. At the time of publication, CoinGecko reported that the top cryptocurrency was trading between $16,781 and $17,026 within a 24-hour period. Furthermore, the mining difficulty in December was just 3.5% lower than the peak, according to Glassnode. This shows that low price action and a challenging mining environment continue to reduce mining earnings.
In its October filing, the miner also acknowledged that the ongoing drop in the price of Bitcoin, the rise in power costs, and the increase in the network’s hash rate have all had a detrimental effect on its operational performance and liquidity in several states.
