Good day everybody,
Welcome to CryptoGod-1's blog on all things crypto. Today I will be doing a write up on some interesting news regarding the problems facing Bitcoin miners currently, and the impact it is having on the industry at large.
Core Scientific
Known as the largest Bitcoin miner by computing power, Core Scientific filed for Chapter 11 bankruptcy protection due to the slump in crypto prices this year. Apparently it has assets and liabilities at between $1 billion and $10 billion going off the filing with the U.S. Bankruptcy Court for the Southern District of Texas, which was filed on Wednesday the 21st of December 2022. They are estimated to have somewhere around 1,000 and 5,000 creditors, while there is about $42.4 million alone owed to its largest creditor, financial services firm B. Riley.
The reason for their struggles is simply down to the falling price of crypto mixed with the rising energy costs, along with the fact they have a $7 million unpaid debt from U.S. crypto lender Celsius Network, one of its biggest customers. This has created the perfect storm when it comes to mining operations, as they have seen profit margins continuously shrink throughout the last 12 months. They are in a position where they run their own mining equipment, while acting as a provider of mining operations for others. All combined, they operate at around 24.4 EH/s, according to an October update, compared to the roughly 244 EH/s of the entire network. As you can see, this is a substantial amount coming in at just over 10% of the entire network.
Within the court filings it has been revealed that Core Scientific has a net loss of $434.8 million for the three months leading up to September 30th, 2022, and that they only had $4 million in liquidity at the time of their bankruptcy filing. The company warned in October that it could run out of cash by the end of the year. Things seemed to be turning around last week, with B. Riley offering the miner a $72 million financing package and arguing that bankruptcy was not the answer to Core’s problems. It’s unclear where that offer now stands.
The issues with Celsius's bankruptcy has also caused major problems for Core Scientific, as they are being prevented from collecting on higher energy bills that the company is racking up at a rate of $900,000 per month, according to their court filings. However, Core Scientific has made a statement in which they have made it clear they do not intend to liquidate but instead to pursue a restructuring backed by creditors who hold over 50% of the company's convertible notes.
Industry at Large
The impact has not been isolated to just Core Scientific, with many others in the crypto mining space facing similar difficulties. Two other large players in the space have also warned of the potential need to file for Chapter 11, with Argo Blockchain and Greenidge Generation suffering in the current market in a similar manner to Core Scientific. Both are, for now, looking at alternative options.
Argo Blockchain made the mistake of posting on their website that they were filing for chapter 11 bankruptcy, but since then have removed the posting and are in advanced negotiations with a third party to sell certain assets and secure equipment financing. Greenindge, meanwhile, have entered into a non-binding debt deal with its lender NYDIG which will allow them to pay down $74 million off their debt through the sale of assets.
Tough times ahead and a sign of the overall state of the Mining market at large, with a statement from Core Scientific following its U.S. Securities and Exchange Commission filing outlining:
"In the event of a bankruptcy proceeding or insolvency, or restructuring of our capital structure, holders of the company’s common stock could suffer a total loss of their investment."
Amazing Turnaround?
In a move which is reminiscent of Hertz, Core Scientific Inc. saw its share price surge by a record 273% on Thursday the 22nd of December 2022, just a day after the Bitcoin miner filed for bankruptcy. This follows on from the companies shares crashing on after their bankruptcy announcement, but as more information has emerged it back clear the company has $1.4 billion of assets against its roughly $1.3 billion of liabilities, meaning it is quite different from most bankrupt crypto firms. Core Scientific also managed to secure access of a $37.5 million loan to help fund its bankruptcy on Thursday the 22nd of December.
Back in mid 20202 retail traders caused similarly confusing spikes of other bankrupt companies which included the likes of Hertz Global Holdings Inc. and JCPenney. However, unlike with these companies spikes, the Core Scientific spike was not directly as a result of retail investors. More than 409 million Core Scientific shares changed hands, which was more than 2,200% its daily average over the past three months, but that was consigned to a mere 1,000 or so buy orders which were placed the Fidelity’s platform.
Even though they managed to see a pre Christmas rally, the overall year for Core Scientific has not been good. It began the year trading at roughly $11 per share, but since then has seen them drop by nearly 99% year-to-date, having fallen by fallen 23.5% in pre-market trading as of 6.30 a.m. ET. The news on Wednesday saw them trading as low as 5 cents following the bankruptcy announcement. This makes it one of the worst performing stocks in the US for 2022, although the rally on Thursday saw the price sitting around $0.13, having gone as high as $0.18 during Thursday trading.
The below image from Bloomberg.com shows the spike in share price.
Interesting time for the Bitcoin miners, and miners at large. It goes to show anyone who invested heavily into Bitcoin at its higher prices are likely to be suffering now.
Have a wonderful day and don't give up even if you are involved in mining.
Peace. CryptoGod-1.
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