Bitcoin Mining Companies – Who Has Declared Bankruptcy and Why
Argo Blockchain, the UK-based digital assets mining company, issued a warning in December that it might have to file for bankruptcy protection over insufficient cash. It’s among the companies that came close to bankruptcy toward the end of the year but survived after selling one of its mining facilities, Helios, for $65 million.
Unsurprisingly, the next year could bring even more pain as miners strain to strengthen their balance sheets and remain operational. Here is a catalog of the companies that are already out and why.
1. Compute North
Based in the U.S., Compute North is a crypto mining company founded by Dave Perrill and PJ Lee in November 2017. The company was trying to disrupt the global data center industry by developing and operating low-cost computing infrastructures. It was among the largest data center operators before filing for bankruptcy in September 2022.
In its bankruptcy filing, Compute North revealed that it owed as much as $500 million to more than 200 creditors. The company’s CEO resigned at the time of the filing but will remain part of the board.
The company filed for Chapter 11 bankruptcy in the US Bankruptcy Court in Texas on September 22. In the filing, Compute North revealed that they owed as much as $500 million to more than 200 creditors. The company’s CEO had also resigned at the time of the filing but will remain part of the board.
By the time of the filing, the company was running four data centers in the U.S.: two in Texas and one each in Nebraska and South Dakota. The company is now progressing with its voluntary bankruptcy proceedings to secure a chance to stabilize its business and execute a restructuring process to allow it to serve its partners and customers.
In February 2022, Compute North announced a $385 million capital raise comprising $300 million in debt financing and $85 million from Series C equity. However, the data center provider failed to survive amid rising energy costs, plummeting crypto prices, and a record mining difficulty.
2. Celsius Mining
Celsius’ petition noted a nearly $1.2 billion deficit in its balance sheet and over 100,000 creditors. In March, the company filed for a confidential S-1 draft with the Securities and Exchange Commission to take the company public. However, most publicly traded shares for Bitcoin mining companies were tumbling then, so Celsius’ IPO was unsuccessful.
The company, founded by Alex Mashinsky and Daniel Leon in 2017, has eight related entities that have declared bankruptcy.
3. Core Scientific
According to a report published in The Financial Times, Core Scientific filed for bankruptcy on Wednesday, December 21, following a year of plummeting crypto prices and rising energy costs. However, the company plans to continue mining while repaying its creditors. It’s still generating cash flows from its mining activities, but not enough to repay its debts on mining equipment.
The proof-of-work cryptocurrency mining company attributes its bankruptcy to falling Bitcoin prices, skyrocketing energy prices, and a $7 million debt that is yet to be repaid by Celsius Network. Additionally, Core Scientific suffered losses amounting to $434.8 million in just three months ending September 2022, leaving its balance sheet with a cash-in-hand balance of $4 million by the time of the filing. The company’s stock fell 98% in the year preceding the bankruptcy, while its capitalization dropped to $78 million from $4.3 billion in July 2021.
Will More Bitcoin Miners Go Bankrupt in 2023?
After one of the crypto community’s toughest years, the industry’s fate remains uncertain. More than $1.3 trillion has been swept off the crypto market’s value, and Bitcoin mining companies are still struggling. Some could even foresee their fate and began to issue warnings.
For instance, Greenidge Generation Holdings issued its warning about a potential bankruptcy filing in late December. In its statement, the Bitcoin miner revealed that it expects to run out of cash in the next two months, forcing it to consider seeking bankruptcy protection. At the end of November, Greenidge’s debts stood at $162 million, with about $74 million owed to New York Digital Investment Group (NYDIG). However, the company secured a deal that will save it from bankruptcy after approaching NYDIG for renegotiations but will now lose its mining equipment and rights to NYDIG.
More filings are expected in 2023, but not all crypto mining companies are in dire circumstances. EZ Blockchain, for example, is in good shape thanks to its minimized cost model and minimal debts.
EZ Blockchain is among the Bitcoin mining companies surviving the crypto winter and is still in good shape.
Despite a tough year for the crypto industry and Bitcoin miners, EZ Blockchain remained bootstrapped, so the company has no debts that might threaten to bankrupt it.
Typically, smart crypto mining companies find alternative ways to save money, and EZ Blockchain has succeeded. The company utilizes innovative solutions that allow it to save on its expenditures and keep its operational costs down while creating revenue streams for the company and its clients.
For instance, the company produces its own crypto mining containers with air or immersion cooling systems. Additionally, they have access to cheap renewable and sustainable energies of nuclear, wind, solar, and gas.
Here’s How Smart Bitcoin Mining Companies Remain Profitable
First, EZ Blockchain manufactures its crypto mining containers, cutting the cost of acquiring the equipment. The company produces its Smartbox™ mining containers and creates a revenue stream by deploying them on-site for its clients. The Smartbox is mobile and fully plug-and-play, allowing for deployment even in the most remote locations.
Second, EZ Blockchain can mine at the highest efficiency with its liquid immersion cooling systems. The company cuts the cost of equipment replacement as immersion-cooled miners are not exposed to dust or corrosion, so they have a longer lifespan. Power consumption is also reduced as the immersion cooling system eliminates the need for high-speed fans used in air cooling systems.
According to a report published by Bloomberg, electricity prices in the U.S. hit a record high in 41 years. Rising power costs are the greatest threat for Bitcoin miners, but EZ Blockchain has found sustainable solutions that allow it to remain in good shape. EZ Blockchain uses alternative renewable energies of wind, solar, gas, and nuclear energy. The company partners with oil and gas producers to put their wasted energy into productive and profitable use. Instead of burning natural gas in oil fields, EZ Blockchain deploys a flaring mitigation solution by transforming the wasted gas into cryptocurrency on-site.
Additionally, when buying electricity, EZ Blockchain finds cheap electricity that ranges between 4-5 cents per kWh. They also cut operational costs by running their mining equipment on low power mode and using software to automate processes. They also handle some of the mining tasks in-house instead of outsourcing, and working remotely, where possible, helps the company minimize office costs.
With these innovative solutions, EZ Blockchain optimizes expenses and avoids debt, allowing the company to keep its mining operations profitable amid the macroeconomic and crypto winter crisis.
Summing It Up
For many, the crypto winter was a cyclical event that has happened before and is expected to end eventually. However, a year on, its effects still rage in the crypto industry, collapsing even the high-profile companies in the industry.
Those that survived the crypto winter could be in for a better year in 2023 as the crypto market begins to show some signs of rebounding. It’s not the first time Bitcoin has been down, so miners only have to do what they must to strengthen their balance sheets and keep mining as they see how far Bitcoin regains. Notably, mining equipment is still super affordable, so now could be a great time for companies to restock or increase their miners as we wait for halving in 2024.