Bitcoin mining giant reports huge liquidity problems. The company is still facing bankruptcy before the end of the year. To make matters worse, many other mines could follow suit.
Core Scientific files a motion to stop payments
One of the largest Bitcoin mining companies, Core Scientific, has submitted a request to the US Securities and Exchange Commission (SEC) stating that it is suspending all debt payments.
Representatives of Core Scientific say that by the end of 2022 at the latest, they will run out of cash resources. According to the submitted report as of October 26, the company’s holdings amount to just 24 BTC and about $26.6 million. Significantly, at the end of September, the company’s safes amounted to 1051 BTC and nearly $29.5 million. This information caused a real bump in CORZ shares. On Thursday, October 27 they opened as much as 70% down.
Core Scientific’s management cites several reasons for the problems. The first, and most important, is the bear market that haunted Bitcoin at a moment that was not anticipated. The second is the ever-increasing cost of electricity with the increase in the global Hash Rate. And the last is the dispute that Core Scientific is having with Celsius Networks.
More capitalizations possible
Cryptocurrency market analyst and founder of Capriole Investments, Charles Edwards points out that the current floor for the cost of producing one Bitcoin, is around $17,000. However, this value is expected to grow steadily. The aforementioned Hash Rate, electricity consumption and its cost are responsible for it. Meanwhile, the price of Bitcoin clearly does not follow the difficulty of mining. It is currently about 70% from the all-time record, recorded in November 2021. The result is that many mines are on the verge of profitability. This is a very strong divergence that could result in a reversal of one of the two factors mentioned. Thus, we can expect a dynamic decline in the Hash Rate, or a strong increase in the value of Bitcoin.
Celsius Network and its impact on the Core Scientific situation
The report to the SEC says that the legal dispute the mine has with the Celsius Network platform is largely responsible for Core Scientific’s problems. At one time, the mining company provided Celsius with infrastructure for hosting services. According to the alleged agreement, some of Core Scientific’s machines belong to Celsius, which benefits from BTC mining. Thus, the mining company’s authorities indicate that representatives of the lending platform owe it $2 million in increased electricity costs. At the time of this writing, the parties are not finding an agreement. On this issue, appropriate proceedings are pending in the bankruptcy court.