• Energy crisis hits crypto miners
• Compute North files for bankruptcy
• Business operations are to be continued for the time being
, Energy prices are exploding worldwide. Responsible for this is the Ukraine war and the associated scarcity of resources. In parts of the USA, a historic heat wave also caused numerous power outages in the summer. For the energy-intensive crypto miners, this places a heavy burden on them.
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The current crypto crash is just as bad for the miners, after all it is reducing the profits from the sale of freshly mined tokens. For example, the original cryptocurrency Bitcoin has lost more than half of its value since the beginning of the year (as of October 5th, 2022). The fact that some miners are now forced to sell tokens from their holdings as a result of increased energy costs is putting additional pressure on prices.
Mining service provider files for bankruptcy
Bitcoin miners are therefore in a double crisis situation in view of increased costs and falling sales at the same time. Compute North, a data center that offers hosting services for crypto miners, has even gone bankrupt. The Minnesota-based company filed for bankruptcy in the Southern District Court of Texas in late September. Texas is home to numerous miners due to the usually moderate electricity costs there, but the power grid in large parts of the US state is quite dilapidated, which is why the heat wave in the summer led to power outages there. The result was a sharp rise in energy prices.
According to the Chapter 11 bankruptcy filing, Compute North, one of the largest providers of mining data centers in the United States, has accumulated debts totaling half a billion US dollars to at least 200 creditors. This is offset by its own assets of around 100 to 500 million US dollars.
“From supply chain and inventory issues to dislocations in the capital and cryptocurrency markets, Compute North has failed to maintain sufficient liquidity to bring planned projects under development online and all of its currently paying obligations,” reads the official statement from CFO Harold Coulby.
What’s next for Compute North?
Chapter 11 bankruptcy allows a troubled company to continue operating while it develops a plan to pay off its debt. In the case of Compute North, attempts are now being made to sell all or at least parts of the company: “Compute North expects that there will either be a reorganization of the business, with a downsized organization focused on the ownership and project management of certain facilities, or a sale of Compute North’s facilities as a going concern,” says Coulby, describing the future prospects for the hosting service.
However, it could be difficult to find a potential buyer. On the one hand, Compute North’s competitors are also suffering from the energy crisis and the weakness of the crypto market, on the other hand, the change from Proof of Work to Proof of Stake in the world’s second largest blockchain Ethereum has significantly reduced the need for computing power. In addition, the Washington government is putting pressure on mining companies to reduce their high energy consumption and make them greener.
Editorial office finanzen.net
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