Crypto

Core Scientific Files For Bankruptcy Protection, Plans To Continue BTC Mining

This year has been difficult for Core Scientific, one of the major Bitcoin mining companies in the world, as a result of the precipitous decline in the price of Bitcoin as well as the rising cost of electricity.

Following the favorable response to a financing proposal from a current creditor that was made on December 14, the business’s stock has skyrocketed about 200% in the previous four days, in the hopes that the company would be able to avoid filing for bankruptcy.

However, there was no way to prevent it from happening. As of the 21st of December, Core Scientific has submitted its bankruptcy petition under Chapter 11.

Just a week ago, the financial services platform B. Riley made an offer to the miner to provide financing in the amount of $72 million in order to prevent bankruptcy and maintain value for Core Scientific’s stakeholders. 

In the offer, B. Riley said that it is willing to finance the first $40 million immediately, with no conditions attached, and that it has no qualms about funding the whole amount.

The financial platform said that the remaining $32 million would be contingent on the BTC miner halting all payments to equipment lenders while Bitcoin prices remained below $18,500. This condition would be met if the miner kept the price of Bitcoin at or below $18,500. 

The most recent time that the price of Bitcoin reached higher than $18,500 was on November 9, when it saw a drop of more than 14% in a single day. The price of the king cryptocurrency is around $16,800 at the moment.

Core Will Continue to Operate Normally

Despite the fact that it has filed for bankruptcy, Core has said that it would keep mining Bitcoin while negotiating a settlement with senior security noteholders. These noteholders control the vast majority of the company’s debt.

After peaking at over $69,000 in November 2021, Core Scientific has seen the token’s value plummet to its current level of roughly $16,800. As a result of this depreciation in value, as well as increasing competition from other miners and higher energy costs, its profit margins have shrunk.

By Tuesday’s close of trade, Core’s market value had dropped to $78 million from a high of $4.3 billion in July 2021, when the business went public via a special purpose acquisition vehicle. Over the last year, the stock price has dropped by more than 98%.

Source: TradingView

Closing Thoughts

Core, which has been struck hard by the market slump, submitted a report on October 26 stating that it may fail on some of its commitments due to the low BTC price, high power prices, and the unwillingness of insolvent crypto lender Celsius to return a $2.1 million loan.

Given that Core will keep mining and functioning regularly, I don’t think this will have a major effect on the cryptocurrency market. But it will still be a painful blow.

This has been the case for a number of failing mining firms and those in the mining industry this year. Plus defunct cryptosystems like FTX, Three Arrows, and Celsius. Core Scientific is, after all, the first publicly-listed Bitcoin miner to file for bankruptcy.


Source link

Related Articles