Market Update: Core Scientific and Iris Energy’s Troubles Deepen as Bitcoin Prices Struggle at $16,000

For most of this year, Bitcoin mining companies have been operating under pressure in an adverse macro environment and an extended bear market in digital assets. The quarterly operations (Q3) and financial reports released thus far have shown that most miners are in a frazzled financial state, with some facing potential withdrawal if current conditions persist or worsen. Capriole Fund founder and crypto-economy modeling analyst Charles Edwards noted on Monday that the market is seeing “the most aggressive miner sell-off in nearly 7 years,” adding that Bitcoin miner pressure has increased by 400%. since the beginning of the month.

Bitcoin miner bloodbath

Troubled miner Core Scientific is apparently headed down the latter path. In its quarterly report filed with the SEC on Tuesday (November 22), the Texas-based mining company disclosed that it is considering closing operations in the absence of additional funds as its cash resources could run out sooner or later. of the year. .

“Given the uncertainty surrounding the Company’s financial condition, there are substantial doubts about the Company’s ability to continue to operate as a business through November 2023,” wrote the company.

The company reported a net loss of $434.8 million in the past quarter, which adds to losses totaling $862 million in the second quarter. Overall, Core Scientific’s financial books have posted a whopping $1.71 billion hole so far this year.

The light of Core Scientific slowly fades

In an earlier Oct. 26 filing with the SEC, the miner warned that his cash reserve was rapidly running out and that Celsius’s default on a $2.1 million loan owed had put him in an even more difficult position. . He also noted that rising energy costs, falling Bitcoin prices, and rising mining difficulties have played a part in his cash crunch. The latest difficulty adjustment on the Bitcoin network on Monday (November 21) saw a slight increase in the mining difficulty figure to a new all-time high of 36.95T, after a slight relief in the previous adjustment.

Mining difficulty

To make matters worse, the option to seek more funds through financing or capital markets is not in the cards for the company as its executives doubt it will successfully capitalize on this liquidity alternative under current market conditions.

The resulting financial uncertainty prompted Core to take drastic measures to stay afloat, including cutting operating costs, increasing hosting revenues, managing capital expenditures, and even defaulting on loans . The latter option is hopeless as it exposes the company to a larger deficit due to the resulting interest rate hikes. It could also end in a legal challenge if his lenders sue for non-payment. Despite efforts to ease the financial stress placed on it, Core Scientific’s survival now hangs in the balance and ultimately hinges on a rebound in Bitcoin prices or falling energy costs, both unlikely before the end of the year.

Iris Energy reports several adjustments, but founders remain confident in cryptocurrency investments

Core Scientific isn’t the only one struggling this week. Iris Energy reported on Monday (November 21) the decision to reduce its Bitcoin mining capacity. The Australian cryptominer justified the same by referring to the urgency of paying an immediate repayment of a requested loan. Iris also highlighted the industry’s poor near-term prospects and growing unprofitability, which almost certainly implies a poor return on investment as a reason to cease mining in two subsidiaries that operate as specialty vehicles.

The affected sub-sectors were powered by mining equipment obtained from the New York Digital Investment Group in a $107.8 million deal. To settle the debt with the latter company, Iris will return the depreciated mining facilities as collateral. Regardless of the adjustments, the co-founders of the firm, Will and Daniel Roberts, still have an unrelenting faith in the cryptocurrency industry. Executives have assured investors in the filing, noting that it remains on a profitable course.

“It’s clearly (gross profit level) still profitable. We just need to figure out what level of overhead the business can support […] all we can do is anticipate future problems, which we have been doing around the [SPV] debt relief through their separation. We are still super excited about the business and the industry.”

The closure of the two branches, which represent a combined mining capacity of 3.6 EH/s, significantly affected Iris’ overall capacity, leaving it at an estimated 2.4 E/H. However, the mining company is said to be in talks with mining infrastructure provider Bitmain about a deal that could add 7.5E/H to its overall capacity.

Foundry Digital lurks around the Compute North business

Meanwhile, Bitcoin mining equipment supplier Foundry Digital announced in a Nov. 22 press release plans to buy two US mining facilities (one in South Dakota and the other in Texas) from crippled Compute North. The subsidiary DCG, operating as a provider of digital asset staking and advisory services, has announced that it has completed the preliminary phase of the purchase agreement. The Rochester-based company also noted that it is exploring acquiring a third facility under construction.

The downside of the ‘hodl’ strategy

Bitcoin miners have historically been considered the top hodlers, but the decline in the price of Bitcoin this week has called the feasibility of this investment approach into question.

“Miners are paying the price for the ‘never sell’ arrogance spread just six months ago,” noted crypto-economy modeling analyst Edwards.

Chain data compiled by IntoTheBlock shows that just over half of Bitcoin holders have experienced losses on their position for the first time in the past two years. For context, the previous percentages of Bitcoin holders losing money peaked at 62% in 2015 and 55% in 2018.

Market Action: Litecoin Surpasses $80 as Prices Increase Midweek

Bitcoin staged a rally to regain ground above the $16,000 handle early Wednesday after unrest on Tuesday caused by Genesis Capital suspending withdrawals. The flagship cryptocurrency has led the collective altcoin market in a rather modest climb.

LTC/USD trading chart. Source: Messaries

Among the top gainers, Litecoin (LTC) is one of the standout assets alongside CurveDAO Token (CRV) and Secret Network (SCRT), having amassed over 28% in the past 24 hours and 35% in the past week. Market analysts have attributed the growing demand for Litecoin to a shift by traders seeking relief from the volatile broader market. The CRV/USD and SCRT/USD pairs are also trading solidly in the positive, up in almost the same range during this period.

To find out more, visit our Investing in Litecoin guide.

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