Bitcoin Miner Core Scientific Files for Chapter 11 Bankruptcy Amid Ongoing Crypto Contagion

Core Scientific, one of the biggest publicly traded cryptocurrency mining businesses in the United States, filed for Chapter 11 bankruptcy protection in Texas on Wednesday, Dec. 21, reported first by CNBC.

Bitcoin and other proof-of-work coins are mined by Core Scientific. The method entails powering data centers around the country that are packed with specialized computers in order to validate transactions and produce new tokens at the same time.

Decreased by Over 98%

Core had a market value of $78 million as of Tuesday, it dropped from a $4.3 billion valuation in July last year when the business went public via a special purpose acquisition vehicle or SPAC.

The company's stock has decreased by more than 98% in the past year, according to CNBC.

A person familiar with the company's financial condition told CNBC that it is still producing positive cash flow but that money is insufficient to pay off the financial obligation associated with the equipment it was leasing.

According to the unnamed source, the company will not go into liquidation but will carry on as usual while negotiating a solution with senior security noteholders, who are responsible for the majority of the company's debt.

Holders of Core's common shares risk losing all of their investments in the company, as per a filing in October.

The agreement reached with Core's convertible note holders is set up so that common equity holders cannot lose everything if the business climate for bitcoin improves over time.

The business also admitted that it would miss its debt payments due in late October and early November and warned that its creditors could sue it for nonpayment at any time.

The price of Core's token has fallen from an all-time high of $69,000 in November 2021 to roughly $16,800. This decline in value has ultimately reduced Core's profit margins.

Crypto Contagion

Celsius, a cryptocurrency lender, sought bankruptcy protection in July and was a Core client. This is another illustration of the contagion effect affecting the whole crypto industry this year.

The crypto market has lost trillions of dollars worth of value in 2022 as a result of rising interest rates and intensifying concerns about an impending recession, according to Reuters.

Crucial business actors like Celsius Network and Three Arrows Capital have been impacted by the downturn as well.

The biggest blow occurred after significant cryptocurrency exchange FTX sought bankruptcy protection last month. Its quick decline has also prompted strict regulatory scrutiny of the way cryptocurrency firms manage funds and run their operations.

Bitcoin has declined by more than 60% this year after experiencing unprecedented growth in 2020 and 2021.