A major cryptocurrency company owes creditors $500 million. What’s the problem?
US provider Compute North, which leases data centres for cryptominers and related companies, has filed for bankruptcy in a Texas court. For now, the Minnesota-based firm will continue to operate, while forming a repayment plan for its creditors. Preliminary estimates put the size of its debt at over $500 million. We tell you more about the situation.
The company began operations in 2017, focusing primarily on cryptocurrency mining, and then switched to providing hosting services for other mining companies. Earlier this year, Compute North experienced problems with delays in opening a major mining facility in Texas due to local legislation, which likely affected its profitability. As a result, the giant's story ended rather miserably.
It is important to understand that such cases in the cryptocurrency niche are not uncommon today, and they occur due to a serious market collapse and a decrease in the number of investors. Perhaps the most striking example of this will remain the legendary Three Arrows Capital crypto fund, which managed billions of dollars just a few months ago.
Three Arrows Capital crypto fund co-founder Su Zhu
Now all that remains of the company is a memory. However, its executives admit that they expected the cryptocurrency market to do too well, but ended up liquidating their own trading positions. Read more about why 3AC collapsed in a separate article.
Why cryptocurrency companies are closing down
According to documents filed with the court, Compute North’s assets are estimated to be worth between $100 million and $500 million. The aforementioned amount of debt must be distributed by the firm to at least 200 creditors, with major miners Marathon Digital and Compass Mining on Compute North’s client list. According to Decrypt’s sources, the provider’s problems should not significantly affect their operations.
Compute North
Compute North raised $385 million in equity and debt funding in February, and struck numerous deals with cryptomainers, including Hive Blockchain and Atlas Mining. Unfortunately, this didn’t help with all the problems. The bankruptcy filing makes Compute North the latest “major victim” of the crypto market’s ongoing bearish trend. Cryptocurrency broker Voyager Digital, platform Celsius Network and the already mentioned Three Arrows Capital fund were previously listed as bankrupt.
The failure of Compute North is quite common for a bearish trend in the cryptocurrency market. Many mining companies are now on the verge of collapse, as the cost of mining Bitcoin in some parts of the world almost equals or even exceeds the market price of the cryptocurrency. But this is a promising opportunity for new entrants: as companies exit the market, Bitcoin’s hash rate drops, and with it, the complexity of mining decreases. This means that more BTC can be mined with the same processing power, so the competition is now primarily determined by the cost of electricity for each individual company.
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In general, it’s not just mining that’s in the spotlight in the crypto industry today. This week, a bill aimed at combating cybercrime and money laundering began to be considered in the UK Parliament. The document is expected to expand the powers of law enforcement agencies to confiscate digital assets. Graham Biggar, director general of the National Crime Agency, commented on the event.
Domestic and international criminals have for years laundered the proceeds of crime and corruption using the structures of UK companies. In doing so, they are now increasingly using cryptocurrencies. These reforms will help us combat both problems.
Cryptocurrency turnover in the darknet by year
Recall that last summer, the Economic Crime Command unit of the Metropolitan Police in London seized hundreds of millions of dollars worth of cryptocurrencies in two separate raids. In June, police seized $158 million after investigating a number of money-laundering offences. Just three weeks later, in the same investigation, police surpassed their previous “haul” and seized $250 million.
We believe that the bill being considered by the UK parliament will be beneficial to the development and acceptance of the crypto industry, if it is actually used to tackle criminals rather than the usual crypto-enthusiasts. Well, it's no surprise that big companies are having problems. After all, the industry is going through a bearish trend right now, which is traditionally the toughest period for blockchain activity. Accordingly, as the market turns around, things will return to normal and the number of miners will increase. The main thing now is to survive the current period.
What do you think about the situation? Share your opinion in our Millionaire Crypto Chat, where we will discuss other important developments in the blockchain world.
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