The year 2022 has not been kind for cryptocurrency mining advocates. With the world economy entering a severe post-pandemic economic depression, inflation is booming — causing cryptocurrencies to suffer an extreme devaluation over the past months.
On top of that, inflation — paired with a harsh heatwave, caused energy costs to significantly rise across Europe and the Americas.
This nightmare combination of high energy bills and the recurring crash of cryptocurrencies has made mining tokens — a previously very lucrative business — into a barely lucrative one at all.
To make matters worse for miners, Ethereum — the then second largest proof-of-work cryptocurrency in the world — transitioned to proof-of-stake on September 15th, leaving over 260 thousand Ethereum miners without a token.
Recently, “Compute North” a Bitcoin mining company filed for a chapter 11 bankruptcy in the US Bankruptcy Court, in the Southern District of Texas.
The filing is still pending before Bankruptcy Judge David R Jones. Dave Perrill, the company’s CEO, also stepped down earlier this month but will continue to serve on the board.
The Minnesota-based firm announced that it will continue to function while it works out a strategy for repayment arrangements with its creditors. According to the statement, Computer North owes up to $500 million to at least 200 creditors. The value of its assets is between $100 million and $500 million, according to the company.
“Compute North’s staff informed us today that the bankruptcy filing should not disrupt business operations,” the company’s facility partner — Compass mining — wrote in a Tweet. “We are continuing to monitor the situation and will provide further updates as they become available.”
The filing comes seven months after the Minnesota-based crypto mining infrastructure provider raised $385 million in a Series C investment and debt financing. It recently broke ground in Texas on a 300-megawatt co-location complex.
What is Computer North?
In 2017, the company began as a cryptocurrency mining operation before turning to provide hosting services for other mining companies. It encountered difficulties earlier this year in building a big mining plant in Texas owing to local laws, which presumably hampered its capacity to earn profits.
In its 6 years of existence, Compute North raised hundreds of millions of dollars in equity and debt funding and closed several agreements with cryptocurrency miners such as Hive Blockchain and Atlas Mining.
Compute North is the next big casualty of the continuing crypto winter, following the bankruptcy filings of crypto broker Voyager Digital, crypto lender Celsius Network, and crypto hedge fund Three Arrows Capital earlier this year.
Mining Companies At Risk
The digital asset market has been harmed by falling cryptocurrency values and rising US interest rates. Mining businesses’ profitability have been severely affected by a particularly turbulent summer. Compass Mining, for example, lost a couple profitable mining operations in Georgia this month.
The closure is the result of a 50% increase in energy expenses. The rationale given by the company was to safeguard miners from recent exorbitant energy pricing adjustments implemented by the local utility, and it also announced intentions to construct another plant in Texas.
