LAGOS (CoinChapter.com) — Shares of the bitcoin mining company Core Scientific (CORZ) dropped significantly today following an announcement by the firm that it is planning to file for bankruptcy.
In detail, Core Scientific in a statement filed with the Securities and Exchange Commission disclosed that it may run out of cash by the end of the year. As a result, the Bitcoin mining company will not make debt payments due in October and November. The company said:
“Given the uncertainty regarding the Company’s financial condition, substantial doubt exists about the Company’s ability to continue.”
Following the announcement, CORZ’s price plummeted as much as 76% on Thursday. Today’s drop represents the company’s worst trading day since going public earlier this year through a merger. Currently, the Bitcoin mining stock is down more than 97% this year.
Additionally, since listing on the Nasdaq, Core’s market capitalization has fallen to $90 million, down from a $4.3 billion valuation in July 2021 when the company went public. Furthermore, Core Scientific has seen the price of the token drop from an all-time high above $69,000 in Nov. 2021, to around $20,500.
In the event of bankruptcy, Core says holders of its common stock could suffer a total loss of their investment. Moreover, analysts have also predicted that more Bitcoin mining companies might also file for bankruptcy soon.
“We could see similar filings within the sector. This is going to weigh on all of the publicly traded crypto miners. Should Core Scientific file for bankruptcy, it would likely be the first large publicly traded Bitcoin miner to do so.”
Brian Dobson, analyst at Chardan Capital said.
Bitcoin Price Collapse, Electricity Cost Responsible For Core Scientific Bankruptcy
Meanwhile, the Bitcoin mining company has blamed the recent development on the drop in the price of Bitcoin. It also pointed out that the massive rise in the cost of electricity has also compounded the current issues.
However, Core Scientific indicated that it’s currently exploring alternatives to better its capital structure. The company revealed that it is working with financial and legal advisers to find a way out. Regardless it posited that it might have to file for bankruptcy.
Additionally, Core Scientific also blamed litigation with Celsius Networks and its affiliates for its financial struggles. Recall that Celsius filed for bankruptcy this spring following this year’s crypto downtrend. Despite selling nearly all its bitcoin in June, the mining company is down to $26.6 million in cash.
Core Scientific mines for proof-of-work cryptocurrencies like bitcoin. The process involves powering data centers across the country, 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.
Other Blockchain Company To File For Bankruptcy
Consequently, it is worth noting that Core Scientific isn’t the only blockchain company hurt by the recent crypto downturn.
Recently, Compute North Holdings, a provider of data services for miners and blockchain companies, filed for bankruptcy. Similarly, this summer, crypto broker Voyager Digital Ltd. filed for Chapter 11 bankruptcy protection.
Furthermore, Marathon Digital Holdings recently notified investors of an $80 million debt exposure to the mining firm. It is worth noting that in the second quarter the top three mining firms recorded a combined loss of more than $1 billion.
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