Bitcoin mining company Rhodium Enterprises has filed for bankruptcy in the Southern District of Texas. Financial difficulties are related to reduced profits from bitcoin mining and rising electricity prices.
How Crypto Companies File for Chapter 11
Following the collapse of the Terra ecosystem, a wave of bankruptcies has hit the crypto industry, including companies like Celsius Network, Three Arrows Capital, Voyager Digital, and FTX. These companies file for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code to reorganize their business and pay off debts. Core Scientific did the same in 2022.
The Worst Time to Mine Bitcoin
Bitcoin mining has faced challenges due to the April halving and a drop in bitcoin prices. Experts at BlocksBridge Consulting suggest that mining was barely profitable for participants without access to cheap electricity. Financial reports from MARA, Core Scientific, and Riot indicate that in July, their bitcoin mining costs exceeded $60,000 per coin.
Mining Centralization
Rhodium's bankruptcy exemplifies CryptoQuant analysts' predictions that miners would gradually leave the market, forming large conglomerates in their place. BTC.com data shows that more than 50% of the current bitcoin hashrate is controlled by two mining pools: Foundry USA and AntPool.
Hence, financial difficulties and rising mining costs have adversely affected Rhodium Enterprises, leading to its bankruptcy. Meanwhile, the market is shifting towards a more centralized structure dominated by large players.
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