Core Scientific, one of the largest bitcoin mining companies, has become the latest company to file for bankruptcy amidst a tough year for the cryptocurrency industry.
Core Scientific mines Proof-of-Work cryptocurrencies like bitcoin. The process involves powering data centers spread across the United States, packed with highly specialized computers that crunch math equations in order to validate transactions and simultaneously create new tokens.
The process requires expensive equipment, some technical know-how, and a lot of electricity.
The company’s action to file for bankruptcy is likely linked to the falling prices of cryptocurrencies that took place in 2022, as well as a a drop in energy prices. Moreover, the company’ s capitalization had dropped to $78 million as of a day before the filing, down from a $4.3 billion valuation in July 2021.
Back then, the company went public through a special purpose acquisition vehicle, or SPAC, but now its stock has fallen more than 98% in the last year.
In yet another example of the contagion that swept several companies in the middle of the year, crypto lender, Celsius, which filed for bankruptcy protection in July 2022, was a Core customer. As such, when Celsius’ debts were wiped out during its bankruptcy proceedings, that put a strain on Core’s balance sheet.
Core is not the only crypto mining company that is affected in this way. In September 2022, Compute North, which provides hosting services and infrastructure for crypto mining, also filed for Chapter 11 bankruptcy.
At the time, another mining company, Marathon Digital Holdings, reported an $80 million exposure to Compute North.
If that wasn’t enough, Greenidge Generation, a vertically integrated crypto miner, reported second quarter net losses of more than $100 million in August 2022 and suspended expansion plans.
Lastly, shares in Argo plunged 60% after its announcement on October 2022 that its plan to raise $27 million with a ‘strategic investor’ was no longer happening.
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