More than a trillion in value has been wiped out from the crypto sector this year on rising interest rates and exacerbating worries of an economic downturn.
Core Scientific Inc, one of the biggest publicly traded cryptocurrency mining companies in the United States, said on Wednesday it filed for Chapter 11 bankruptcy protection, the latest in a string of failures to hit the sector.
More than a trillion in value has been wiped out from the crypto sector this year on rising interest rates and exacerbating worries of an economic downturn. The slump has eliminated key industry players such as Three Arrows Capital and Celsius Network.
The bigger blow came after major crypto exchange FTX filed for bankruptcy protection last month. Its swift fall has also sparked tough regulatory scrutiny of how crypto firms hold funds and conduct business operations.
Several crypto companies have since been plagued by contagion concerns from the fallout of the FTX collapse, which has quashed hopes of a recovery in prices of digital assets in the near-term.
After rapid growth in 2020 and 2021, bitcoin – the most popular digital currency by far – is down more than 60% this year, pressuring the crypto mining sector.
Core Scientific said in a statement the bankruptcy filing was necessitated by a decline in the company’s operating performance and liquidity amid the prolonged decrease in the price of bitcoin.
The company’s shares have lost roughly 98% of their value so far in 2022, shrinking its market cap to about $78 million. The stock fell another 26% in premarket trading on Wednesday. Shares of other crypto miners including Riot Blockchain, Marathon Digital and Hut 8 Mining Corp have all shed more than 80% this year.
Austin, Texas-based Core Scientific said it would not liquidate and would continue to operate normally, as it expects to enter into a restructuring support agreement with its creditors, who represent over 50% of the holders of its convertible notes.
Core Scientific said its creditors have also agreed to provide up to $56 million in debtor-in-possession financing.
One of the largest creditors of Core Scientific, B. Riley Financial Inc, had offered $72 million last week to avoid the bitcoin miner’s bankruptcy.
In its bankruptcy petition, Core Scientific said it has $1 billion to $10 billion in assets and liabilities, and creditors between 1,000 and 5,000.
Core Scientific went public in 2021 through a merger with a blank-check company in a deal that at the time valued the miner at $4.3 billion.