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Core Scientific Inc. Files for Chapter 11 Bankruptcy

Core Scientific Inc. Files for Chapter 11 Bankruptcy

By Oreld Hadilberg
Reviewed by Tony Spilotro

Table of Contents

The operations of the U.S.-based Bitcoin mining company Core Scientific have been uncertain due to the ongoing crypto market downtrend in 2022. As a result, in late October, many suspected the firm might file for bankruptcy soon. Unsurprisingly, the suspicion is now a reality.

The globally recognized Bitcoin mining firm eventually filed for Chapter 11 bankruptcy. This information came from a CNBC report on December 21, 2022.

What Happened To Core Scientific Inc.?

According to CNBC, this action is connected to the rise in energy costs and the fall in cryptocurrency prices.

Core Scientific uses the proof-of-work mining process, similar to that of Bitcoin. This mining system uses high energy to power computers to solve complex mathematical equations. Through this process, the firm earns new tokens.

Meanwhile, the companyโ€™s market capitalization has significantly dropped between July 2021 and December 2022. On Tuesday, December 20, 2022, Core Scientific recorded a market cap of $78 million from a high of $4.3 billion in July 2021. Moreover, about 98% of its stock was also lost in the same time frame.

But at the start of 2022, the firm had displayed some outstanding performance. A noteworthy example is the Bitcoin production which was about 1,077 in January 2022

However, things changed due to some unforeseen factors, particularly in October. A notable factor is an increase in hash rates, which led to growing market competition and a drop in cryptocurrency prices. These occurrences have thwarted the initial progress of the firm, bringing survival chances to almost zero.

The Possible Effect Of The Bankruptcy On BTC Price

In the meantime, Core Scientific's bankruptcy might not affect the price of Bitcoin for some reason. For instance, the company is still carrying out its normal operations. Also, about 5% of the global Bitcoin hashrate belongs to the firm.

Aside from these facts, the firm sold off a significant portion of its Bitcoin holdings before the bankruptcy warning in October. As a result, toward the close of the month, Core Scientific had only about $26.6 million in cash and 24 Bitcoin tokens. That means the massive plunge in BTC price will more likely be not seen.

Also, the possibility of a reduced hashrate cannot be anticipated now, considering the company's recent performance. As per a report from the company, it mined around 47.7 Bitcoin tokens within 24 hours on December 19, 2022.

At the time of this piece, Bitcoin trades at $16,841, having a daily price of -0.10%, according to CoinMarketCap BTC data. Based on Bitcoin price analysis, thereโ€™s a resistance level at $16,900. A bullish price move can be expected if the token can break this price mark.

How Is Core Scientific Now?

The announcement from Texas-based Core Scientific, Austin, that the company might file for bankruptcy before 2022 end emerged in October 2022.

Since the announcement was released, the struggle to stay in operation has yet to ease. Currently, some sections of the firm are still functional and generating funds. But the generated funds need to be more adequate to sponsor the hiring of the equipment in use.

According to the report, there will be no breach of the agreement between the company and senior promissory bill holders. These individuals are the custodians of the higher portion of the company's debts.