Market Update: Core Scientific and Iris Energy Troubles Deepen as Bitcoin Price Struggles at $16K

For the better part of this year, Bitcoin mining firms have operated under strain against an adverse macro environment and extended digital assets bear market. The thus-far released quarterly (Q3) operations and financial reports have shown that most miners are in an exhausted financial state, with some facing a potential folding if current conditions persist or worsen. Capriole Fund founder and crypto-economics model analyst Charles Edwards observed on Monday that the market is seeing the “most aggressive miner selling in almost 7 years now” adding that Bitcoin miner pressure has spiked 400% since the start of the month.

Bitcoin miner blood bath

Troubled miner Core Scientific is one seemingly headed down the latter path. In its quarterly report filed with the SEC on Tuesday (Nov 22), the Texas-based mining firm divulged that it is considering winding down operations in the absence of additional funds as its cash resources could be depleted before or by the end of the year.

“Given the uncertainty regarding the Company's financial condition, substantial doubt exists about the Company's ability to continue as a going concern through November 2023,” the company wrote.

The firm logged a net loss of $434.8 million across the gone quarter, adding to losses totaling $862 million in Q2. Overall, Core Scientific's financial books have a massive $1.71 billion hole so far this year.

Core Scientific's light slowly dimming out

In a previous Oct 26 filing with the SEC, the miner warned that its cash reserve was quickly running down and that Celsius' defaulting of a $2.1 million loan owed to it had put it in an even more difficult position. It also noted that soaring energy costs, declining Bitcoin prices, and increased mining difficulty had played a role in its liquidity squeeze. The latest difficulty adjustment on the Bitcoin network on Monday (Nov 21) saw a slight increase in the mining difficulty figure to a new all-time high of 36.95 T, following slight relief in the preceding adjustment.

Mining difficulty

Further worsening the situation, the option of seeking more funds through financing or capital markets isn't on the cards for the firm as its executives have doubts about successfully capitalizing on this liquidity alternative in the current market conditions.

The resulting financial uncertainty has pushed Core to drastic measures to remain afloat, including slashing operating costs, increasing hosting revenues, managing capital expenditures and even defaulting on loan repayments. The latter option is desperate as it exposes the firm to a bigger deficit on account of consequent increases in interest rates. It could also end up in a legal challenge if its lenders sue for non-payment. Despite efforts to ease the financial stress exerted on it, Core Scientific's survival now hangs in the balance and ultimately hinges on Bitcoin prices bouncing up or energy costs subsiding – both unlikely before the end of the year.

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

Core Scientific isn't the only one struggling this week. Iris Energy reported on Monday (Nov 21) a decision to cut down its Bitcoin mining capacity. The Australian crypto miner justified the same referring to the urgency to settle an immediate repayment of a requested loan. Iris also highlighted the sector's poor short-term prospects and increasing unprofitability, which almost certainly implies a poor return on investment as a reason for ceasing mining operations in two subsidiaries operating as Special Purpose Vehicles.

The affected subindustries 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 firm, Iris will return the mining rigs written down as collateral. Beyond the adjustments, the company's co-founders, Will and Daniel Roberts, still hold an unrelenting belief in the cryptocurrency sector. The executives assured investors in the filing, stressing that it remains on a profitable course.

“It's clearly (at a gross profit level) still profitable. We just need to work out what level of overhead the business can support […] all we can do is pre-empt future issues, which we did around the [SPV] debt facilities by ringfencing them. We're still super excited about the business and the industry.”

The shutdown of the two subsidiaries, which account for a combined mining capacity of 3.6 EH/s, has significantly affected Iris' overall capacity, leaving it at an estimated 2.4 E/Hs. The mining firm is, however, reported to be in talks with mining infrastructure provider Bitmain for an arrangement that could add 7.5 E/Hs to its overall capacity.

Foundry Digital lurks around Compute North's business

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

The flip side of the ‘hodl' strategy

Bitcoin miners have historically been considered ultimate hodlers, but the descent of Bitcoin price this week has challenged the viability of this investment approach.

“Miners are paying the consequences of the “never selling” arrogance widespread just six months ago,” crypto-economics model analyst Edwards noted.

On-chain data compiled by IntoTheBlock shows that just over half of Bitcoin holders have registered losses on their position for the first time in the last two years. For context, the previous proportions of Bitcoin holders losing money peaked at 62% in 2015 and 55% in 2018.

Market action: Litecoin races past $80 on midweek price boost

Bitcoin has staged a recovery to regain ground above the $16,000 mark early on Wednesday following unrest throughout Tuesday occasioned by Genesis Capital's suspension of withdrawals. The flagship cryptocurrency has guided the collective altcoin market in charting a fairly modest climb.

LTC/USD trading chart. Source: Messari

Among top gainers, Litecoin (LTC) is one of the standout assets alongside CurveDAO token (CRV) and Secret Network (SCRT), having accrued more than 28% in the last 24 hours and 35% in the last week. Market analysts have chalked up the increasing 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 firmly in the green, up by near the same range during this period.

To learn more, visit our Investing in Litecoin guide.