The bitcoin miner Will Core Scientific survive the next halving? Its CEO Adam Sullivan was relatively optimistic.
Giant with feet of clay
Core Scientific has come a long way. The miner found himself on the verge of bankruptcy at the end of 2022 and still remains in difficulty.
The company, which has seen more than 720,000 ASICs passed since its creation, has placed itself under the protection of chapter 11which is different from chapter 7. The latter is a bankruptcy procedure. The company must then close its doors and sell all its capital. Conversely, the company continues to operate with the chapter 11.
Today, Core Scientific still operates more than 700 megawatts that power 206,000 miners. Adam Sullivan hopes to return to the NASDAQ before the end of the year.
Here is Mr. Sullivan’s explanation of the slump his company has found itself in:
“During 2021 and 2022, growth was the primary concern. More power needed to be put online, more megawatts put into service, etc. And to do this, many companies have raised equity and debt. Core Scientific has been able to finance a significant portion of its growth using debt, which makes us very sensitive to changes in the price of bitcoin. In the third quarter of 2022, things took a turn for the worse when energy markets began to skyrocket alongside a decline in bitcoin. Bitcoin miners’ margins have been crushed, putting Core Scientific in a very uncomfortable situation. »
In short, Core Scientific erred on the side of optimism. Let us complete these statements by saying that the rise in energy prices had not been anticipated in the accommodation contracts. However, Core Scientific is the largest host of miners for third-party companies.
Bitcoin Halving
Adam Sullivan believes that different miners should be evaluated based on the efficiency of their ASIC (J/TH) fleet (compared to the average overall efficiency) and their total hashrate. According to him, these two parameters are essential to gauge whether a miner risks being among those who will be skimmed by halving.
For its part, Core Scientific is preparing for this by distributing its machines in the most intelligent way possible within its different facilities:
“We have seven facilities across five states, which allows us to have different types of electricity contracts, different pricing levels and different levels of intermittency. […] We have started to allocate our machines based on what we think is most profitable. Typically, this means our less efficient machines are moved to sites with more intermittency in exchange for lower electricity prices. Our most efficient machines are placed in our facilities with the most stable temperatures and operating times. »
In other words, Core seeks maximum efficiency with the means at hand. Asked about the impact of halving on the value of Bitcoin, Mr. Sullivan remained cautious:
“We’ve seen it all before. From the bull run a few months after the halving, to the bull run just before the halving, or even a bull run after a dive. […] It is clear that we expect additional volatility over the next 12 months. I expect there to be significant interest from institutional investors in ETFs. »
[Article à ne pas manquer : Bitcoin Mining – Les 12 règles pour se louper]
Saved by the bell?
It’s hard to imagine that the Halving/ETF combo could not have a positive effect on bitcoin, all things being equal.
This would be a breath of fresh air for Core Scientific which faces ever fiercer competition, not to mention the latest ASIC models which offer an efficiency advantage to newcomers.
Despite the lack of cash, Core Scientific was able to get their hands on new equipment:
“We announced a few weeks ago that Bitmain had invested in Core Scientific. They provide us with 27,000 machines ($77 million, including $54 million paid in Core Scientific shares). These 27,000 machines are S19 XP antminers. We will also continue to review S21 antminers. »
Concerning the hashrate which is constantly breaking new records, Mr. Sullivan does not think that we will reach 500 EH/s before the halving:
“Many infrastructure projects have been abandoned over the past six months. […] We find ourselves in a sort of impasse where the infrastructure is not sufficient to accommodate all the machines being manufactured. Some older generation miners will have to make way for new generations. I think that the S17 antminers which have an efficiency of around 34 J/TH will be disconnected after the halving. The hashrate will increase over the coming year, but looking at ASIC delivery schedules and infrastructure shortages, I don’t know if we’ll necessarily see 500 EH/s before halving. »
Miners will have to throw in the towel if the price of bitcoin does not rise. Which is ultimately good news for decentralization and the carbon footprint of the Bitcoin network. More ASICs will end up where electricity is cheap. That is to say where surpluses of renewable energy exist.
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