According to a source acquainted with the company’s financial situation, cryptocurrency mining giant Core Scientific will file for Chapter 11 bankruptcy in Texas first thing Wednesday morning. The decision was made after a year when the value of cryptocurrencies plummeted and energy costs increased.
Bitcoin and other proof-of-work coins are mined by Core Scientific. In order to verify transactions and issue new tokens at the same time, the procedure requires the powering of data centers around the region equipped with highly specialized computers. This procedure calls for high-priced machinery, some technical expertise, and a substantial amount of power.
As of Tuesday’s close of trade, Core was valued at $78 million, down from a high of $4.3 billion in July 2021, when it went public through a special purpose acquisition vehicle or SPAC. Over the last year, the stock price has dropped by more than 98%.
A source close to the firm reports that it is still making money, but not enough to cover the financial debt it incurred while leasing equipment. This source, who asked not to be identified as discussing internal company affairs, said that the firm would not be going into liquidation but would instead continue business as usual while it negotiates with senior security noteholders, who control the vast majority of the company’s debt.
While Core warned shareholders in an October filing that they risked a complete loss of their investment, this may not be the case if the sector as a whole begins to show signs of improvement. Core’s convertible note holders have struck a contract that protects them from complete ruin in the event that bitcoin’s economic climate improves. In addition, the firm said that it would not be able to make the debt payments that were due in late October and early November and that its creditors were free to file lawsuits against it for nonpayment.
The price of bitcoin, which is predominantly minted by Core, has fallen from a record high of almost $69,000 in November 2021 to roughly $16,800. Profit margins have shrunk because of the decline in value, more competition from other miners, and higher costs of producing and using energy.