Core Scientific Inc., one of the largest publicly traded cryptocurrency miners in the United States said wednesday that it had filed for Chapter 11 bankruptcy relief. This is the latest in a string of failures in the sector.
Rising interest rates and growing fears about an economic downturn have led to more than a trillion dollars being wiped out of the crypto sector. Three Arrows Capital and Celsius Network are key industry players that have been wiped out by the slump.
The greatest blow came last month when major crypto exchange FTX filed to be protected from bankruptcy. Its rapid decline has also drawn intense regulatory scrutiny into how crypto firms operate and manage funds.
Several cryptocurrency companies have been plagued by contagion concerns since the FTX disaster, which has quashed hopes for a quick recovery in digital asset prices.
After experiencing rapid growth, bitcoin – the most-used digital currency – has fallen more than 60% since this year. This is creating pressure on the crypto mining market.
Core Scientific stated in a statement that the bankruptcy filing had to be done due to a decline in the company’s operations and liquidity. This was in the face of the steep drop in bitcoin prices.
The company’s share price fell 98% in 2022. This shrinks its market cap by $78 million. On Wednesday, the stock dropped another 26% during premarket trading. Crypto miners like Riot Blockchain Marathon Digital or Hut 8 Mining Corp have lost more than 80% this year.
Core Scientific in Austin, Texas said it would not be liquidated and would continue to operate normally. Core Scientific intends to enter into an agreement of restructuring support with its creditors. They represent more than half the holders of its convertible debt.
Core Scientific also stated that debtors in possession have agreed to finance up to $56 million through Core Scientific.
Core Scientific’s largest debtor, B. Riley Financial Inc (RILY.O ), offered $72M last week to stop the collapse of the bitcoin miner.
Core Scientific claims it has assets and liabilities in excess of $10 billion. It also lists creditors in the range of 1,000 to 5,000.
Core Scientific was acquired by a blank-check corporation in a merger that took the miner public in 2021. Its value at the time was $4.3 billion.