Lose $1.7 billion on $519 Million in Revenue? Bitcoin Miner SPAC Core Scientific Shows How. Bankrupt a Year after Going Public?

Consensual hallucination was required to pull this off.

By Wolf Richter for WOLF STREET.

US Bitcoin miner and crypto-hosting-platform Core Scientific – the largest publicly traded crypto miner by computing power – which on October 27 issued a bankruptcy warning, nine months after going public via merger with a SPAC, reported on November 22, that it lost $435 million in the third quarter, on $162 million in revenues; and that it lost $1.7 billion in the first nine months of the year, on $519 million in revenues.

“The Company anticipates that existing cash resources will be depleted by the end of 2022 or sooner,” it said. And that would be the end.

The company lives by the price of bitcoin, and now dies by the collapsed price of bitcoin. It mentioned the word “bankruptcy” 35 times in its 10-Q filing with the SEC on November 22: its own potential bankruptcy filing, unless it gets via a divine miracle some “additional liquidity”; and the bankruptcy filing of its largest customer, Celsius.

The fundamental rule in crypto-land is that every company is tightly connected by innumerable tentacles to lots of other crypto companies – borrowing from and lending to each other – which makes for smooth and efficient contagion within crypto-land. They all went to heaven together, and now they’re all going to heck together.

The company, which is based in Austin, TX, blamed the threat of the bankruptcy filing on “the prolonged decrease in the price of bitcoin” – in Q3, “the average price of bitcoin declined to $21,324, compared to $32,502 for the three months ended June 30,” it said. Alas, those were the Good Times. The price of bitcoin has meanwhile plunged to $16,000.

It also blamed “the increase in electricity costs.” It needs electricity in massive quantities to power its crypto mining rigs and data centers, and electricity is therefore one of its major input costs.

And it blamed its “ability to meet its liquidity needs,” or rather lack of ability, and while at it, it blamed its debt covenants that it cannot comply with.

Its reserves were down to $32 million in cash and just 62 Bitcoin as of October (about $1 million in fiat), down from over 8,000 Bitcoin earlier in 2022. It had sold those Bitcoin holdings to stay afloat as Bitcoin was plunging. At the same time, electricity prices soared. And because its stock price imploded, it couldn’t raise cash by selling more stock.

Given its huge cash burn, that $33 million will be used up before year-end. That’s the message here.

This is a lot to swallow for investors that had bought the hype and hoopla of a company that went public less than a year ago.

Its shares [CORZ] have collapsed by 99% from the peak a year ago, after the SPAC merger was announced but before it was completed, to sheer nothingness ($0.13) today, another one of hundreds of astounding displays of how insidious the Wall Street hype-and-hoopla show had become in 2021 to dump something like this into the lap of the public. But nothing special in my huge and growing pantheon of Imploded Stocks:

Another US-based crypto-miner data-center provider, privately-held Compute North, already filed for bankruptcy in September, owing as much as $500 million to at least 200 creditors.

Core Scientific has $1.3 billion in liabilities, including nearly $1 billion in notes that were coming due. The company had already said it won’t make debt payments due in late October early November – and didn’t make them. It’s trying to negotiated with its creditors.

The hype and hoopla show: consensual hallucination.

Just to see how Core Scientific’s merger with a SPAC was pitched to the public, we’ll look at the hype and hoopla that was fed to these hapless investors. We’ll look at the announcement in July 2021 that the company issued about its merger with a SPAC at a “pro-forma enterprise value of $4.3 billion.”

This is some extra-special but ultra-common stuff of the insidious hype-and-hoopla show on Wall Street – people who believed this crap participated in what I call consensual hallucination.

This is what the announcement said in July 2021 with a perfectly straight face:

“Core Scientific is the largest blockchain infrastructure, hosting provider and digital asset miner in North America, with estimated year-end power capacity of approximately 510 megawatts through four dedicated facilities strategically located across the United States.

“The Transaction positions Core Scientific to mine for digital assets and provide and develop hosting and other blockchain services at scale, using low cost, clean and renewable energy for a growing, global decentralized finance industry.

“In addition to offering proprietary digital asset mining infrastructure and management software to large-scale partners around the world, Core Scientific’s pending acquisition of Blockcap, Inc. (“Blockcap”), a leader in digital asset mining, positions the Company as North America’s largest vertically integrated self-mining business.

“Blockcap’s recent acquisition of RADAR, a pioneer in the blockchain technology space, further strengthens Core Scientific’s leadership position and value creation potential through the development of decentralized finance (“DeFi”) products and services.”

If you read this back then and believed it, and wanted to invest in this outfit, it’s a sign you were engaged in consensual hallucination.

The whole kit and caboodle is now blowing up. As soon as the price of bitcoin started dropping, the hype-and-hoopla show collapsed, the shares imploded, the company defaulted on its debts, and it’s getting ready for a bankruptcy filing.

People should be going to jail for this but won’t. And the SEC won’t do anything either because it has been asleep for years. We have already counted over 1000 companies whose shares have imploded by 80%+ from their recent highs – not just in crypto-land but everywhere. And this won’t be over until all that stuff is gone.

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  147 comments for “Lose $1.7 billion on $519 Million in Revenue? Bitcoin Miner SPAC Core Scientific Shows How. Bankrupt a Year after Going Public?

  1. MarMar says:

    lol

    And they were burning through half a gigawatt for this BS? Good riddance.

    • Jos Oskam says:

      In their announcement they stated using using “…low cost, clean and renewable energy…” so no problems there.

      But wait… what? Now they come out and blame “…the increase in electricity costs…” for the mess they find themselves in.

      These b4st4rds are unbelievable. Just throw them all in the slammer and take plenty of time investigating what’s what.

      • sam smith says:

        interesting comment fidelity investments an old time private company is getting into crypto big time hireing 100 in the first quater millions of investors have a big part of retirement invested with fidelity but its a private company fidelity is so trusted but so was ftx where is the truth an oversight

        • joedidee says:

          I remember the dot bomb implosion

          but I have to admit this is much more fun to watch

        • LPM says:

          Imagine, when the US government makes it legal for banks to take pot deposits.At the beginning of 2023. bit coin will drop to 50 bucks and all the other coins will go to pennies. I would not want to be holdings coins when that happens. The Bank stocks will then go to the moon. and the republicans will get their payday.

      • Leo says:

        So much of electric power wasted for nothing!

        Meanwhile bitcoin mining hardware is compute intensive (CPU or GPU based). So with collapse of bitcoin miners Intel, Nvidia and AMD would be looking at inventory rise and Mass Layoffs in 5 digits.

        • Brian says:

          CPUs and GPUs are not useful for mining bitcoin and haven’t been for almost a decade.

          High-efficiency bitcoin mining requires specialised ASICs (“chips”) to do the calculations at a power cost sufficient to make a profit. Ethereum is more complex and was, until recently(*) mined using GPUs.

          As for profit, mining is a “race to the bottom”. Profit is shared pro-rata among all the miners in the world. Those who can do the mining for a lower cost due to cheaper electricity or more efficient hardware crowd out the others. Margins are thin so when the price of bitcoin goes down, the profits no longer cover the costs and miners exit until the remaining ones again make a profit.

          (*) Ethereum recently went through “the merge” which did away with proof-of-work. There are no more complex calculations to be done and the energy cost of the network has dropped by something like 99.9%.

        • Leo says:

          I got the digits wrong. Mass layoffs is 4 digits will start with intel, our 50+ Billion dollar share buyback queen.

          The interesting thing is that the executives who greatly benefited from buybacks will not be found accountable and will not be part of layoffs.

        • Whimsical says:

          Do you think electricity used to grow 8 billion primates on this planet is put at better use?

        • joedidee says:

          well you brought up global climate cop27

          So much of electric power wasted for nothing!

          how about we tax each of the private planes the attendees at COP27 came in – and use it for reparations

          if we charged $1,000,000,000 then they’d immediately have $800 billion – yah do as I SAY
          cause I used private jet to get here – my pollution, just like chinas doesn’t count

        • lpm says:

          NA, China is selling the items on ali. you can build a bit coin miner piece by piece for around 500 dollars on ali. these companies were just scammed by the bit coin mining machine makers.
          the market soon will crash when the pot people can start using the banking system anyways. and people will go on to the next fad. those stupid pictures ntf’s. or buying stock in companies like tesla that have only sold 375,000 cars in the usa in 2022. seems odd a stock would be so high with sales like that. in my opinion all the stocks should be penny stocks and ceo pay should be what it was in the 1950’s

      • Old school says:

        I think there are two schools of thought.

        One is let the government agencies protect the public. Downside is people assume government is on the job and don’t do due diligence.

        Other is to let people learn the hard way and then you are more sceptical about handing your money over next time.

        In general, people don’t read SEC filings. Supposedly that is one thing that made Warren Buffett a good investor that he could read SEC filings like the average guy would read a novel.

        • Bobber says:

          How can you regulate? You’d need an army of well-paid high-performing individuals to crack down on Wall Street. Congressional lobbying and revolving doors ensure that government agencies have clear limits to budgets and capabilities. As a consequence, nearly all the power is on the other side of the fence. Government agencies are short-leashed and overwhelmed. Can you imagine the heat the SEC would have gotten from Congress and private industry if it tried to regulate crypto during the boom times?

          Any attempt at operational regulation would be a mirage, intended to deceive a hapless unknowing public, and it would set up the next big wealth transfer to scam artists.

          The best form of “regulation” is the penal system. I’m sure the bitcoin scammers are sweating a bit after seeing the Theranos lady get hammered with a 10 year sentence. We need to see a lot more of that, not more ineffective expensive regulation regimes.

          You have to give people freedom to make decisions…to succeed or fail. How else will they learn?

        • Shandy says:

          How about no “government” intervention towards the common person’s choices?

        • Happy1 says:

          Investors should live by the law of caveat emplemptor. This stuff was obviously garbage to anyone with an ounce of brains. Regulatory action isn’t needed, let fools be parted from their money and the market works.

    • Djreef says:

      They should have listened to those of us who saw all of this coming.

      All of this nonsense could have been avoided.

      • Leo says:

        Consensual Hallucination in housing market with Mainstream media:

        2 months back: Housing remains to be a good investment in Long term.

        1 month back: Housing is still up year on year. This time is different than 2008 and while prices may not go higher, they should go sideways.

        Yesterday: 2023 housing markets look ugly but it will not be like 2008. There will be no forced selling as there is no credit risk and there is so much demand.

        2 months in Future: While there were brutal corrections, housing has become affordable again and investors should come back with increasing demand.

        4 months in future: There was force selling due to layoffs and uncertainty in job markets that took significant toll on Housing. However, the bad news has passed, Fed is ready to Pivot and it will only get sunny from here.

        6 months in Future: Job market has still not recovered and continuous lay offs have been hurting the housing. The good news is, the conditions are set for instant Fed Pivot.

        ……….

        And so it keeps going on for people who don’t read wolfstreet.

        There are still websites claiming that this is the right time to enter cryptos.

        • Augustus Frost says:

          I think the timeline is short, but your sentiment is correct.

        • Bobber says:

          12. You lost all your money, but that’s OK because nobody could see it coming.

        • gary2 says:

          Leo, you and Bobber and brilliant. What do you think of this: “That last crypto company was a scam, but THIS crypto company is the real one and will buy up their assets”

        • Leo says:

          Bobber and Gary2, these look awesome. I guess we have exceeded the combined IQ of most crypto investors!

      • joe3 says:

        Humans are nothing but nonsense. Without nonsense, there is nothing left. Of course there is entertaining nonsense and destructive killing nonsense.

    • Shandy says:

      I’m sitting down now, glass of Merlot naughty me commenting before reading. On purpose this time as thinking “I” should have been that crook.
      I should have cheated the all of you.
      I’m finishing cooking dinner splendid now read articles with community section.
      I’m not surprised the morrow brings same.
      Can’t someone, something, anybody end this?

    • gl says:

      Anybody know what happens when the power goes out? The grid fails or is taken out?

    • Pete says:

      Love the philosophical nature of “self-mining”. I guess that’s further evidence of ‘Consensual Hallucination’.
      How about the obvious: Code is Code is Code….

    • Thomas Pained says:

      Glad to see that another rational person is out there in this world. Pay attention to Tether!! When it goes…which it will…the whole system collapses. Remember Jamie Diamond has endorsed bitcoin/blockchain. Meaning all the big banks are in deep. Derivative deep!

  2. Konrad says:

    The whole industry is a house of cards, waiting to collapse.

  3. Michael Engel says:

    1) The bet on FOMO was wrong. Liquidity was drained, in real terms,
    from the market, since Jan 2022.
    2) Many foreign currencies are down 30%-40%, but highly leveraged
    creepto that rely on transferring dollars to their accounts are plunging
    fast.
    3) Inflation sucked liquidity from the markets. The Real M1 is down since Jan 2022. The gov built a liquidity cliff since Jan 2020, up from $1.5T to $7.3T, down $600B in less than a year.
    4) Creepto was rising like a hawk on the warm air of FOMO, diving from above to hunt Gen Z and millennial.
    5) The debt ceiling will cont to rise. The gov will cont to finance themselves, but poor and young people can’t. The gov crowded money
    from the private sector, The gov can pile up debt, but business can’t. It’s
    not fair : businesses cannot compete with the gov forever, businesses go bk.

    • Marcus Aurelius says:

      Only GOLD money can prevent that.

      All transactions in grams-grains of GOLD.

      All settlements in grams-grains of GOLD.

      Yeah, yeah yeah. “You can’t eat GOLD”.

      You cant eat Bitcoin, or Paper Notes or your IRA, either.

      But mankind can not (as of yet) create GOLD.

      • Ed C says:

        Well, they can dig it out of the ground. But at least it is real and tangible and useful for things. Most electronic devices that require high reliability (don’t they all?) use connector pins flashed with gold.

      • Seen it all before, Bob says:

        Gold is more often used to attract a mate.

        Often when this happens, it may not be a long-term mate.

        What happens to all of the wedding rings in a divorce? Are they melted down and recycled?

      • Sams says:

        Well, it is possible to make gold with a particle accelerator. Very expensive gold. The bankers found the easy way and did go for fiat money. Easy and cheap to make.

      • Ross says:

        https://www.moneyandbanking.com/commentary/2016/12/14/why-a-gold-standard-is-a-very-bad-idea

        TLDR:
        “Under a gold standard, inflation, growth and the financial system are all less stable. There are more recessions, larger swings in consumer prices and more banking crises. When things go wrong in one part of the world, the distress will be transmitted more quickly and completely to others. In short, re-creating a gold standard would be a colossal mistake.”

      • 91B20 1stCav (AUS) says:

        Marcus – depending on your faith in the advancement of technology, now might be a good time to develop a gold-standard backup plan should ‘the Philosopher’s Stone’ of commercial nuclear fusion come into being…

        may we all find a better day.

    • Ross says:

      This is the first time i have clearly understood Michael Engle. Thank you!

  4. Michael Engel says:

    TY breached a long term support line. TY will cont to rise. TY bounce
    isn’t good enough. When done, TY will plunge. Plunge higher 10Y
    interest rates.

  5. greg says:

    It never ceases to amaze me how factual barriers to a companies financial success are overlooked in the FOMO.
    BTC / crypto are purely energy derivatives, pixelated monkeys don’t keep the lights on

  6. Motorcycle Guy says:

    Here’s a comment that may have the readers now and when the next case of voluntary hallucination opportunity presents itself:

    Back when Y2K was going to make all fiat worthless, I attended a seminar where the speakers were going to tell you how to protect yourself from the coming financial upheaval.

    The speaker just before the lunch break had supposedly sold a 50 million dollar investment consulting business and put all his money into little nicely colored “gems” (or so he referred to them).
    And he was willing to help out the attendees by selling them the multi colored stones he had with him.

    During lunch, the client who had asked me to attend the program said to me in a very excited voice, “what do you think about those precious stones?”
    My reply was, “If he really believes that our dollars are going to be worthless and his gems will be valuable, why doesn’t he just tell us where he bought the stones and let THAT guy take the loss?”
    My client looked away from me for about 10 seconds and then looked back and said, “You are absolutely correct.”

    • w.c.l. says:

      Same kind of question I ask when someone tries to pitch a multi-level marketing or some other “we’re going to make you rich” scheme. “If this is such a great deal, why are you telling me?” (‘cause to you I’m just another mark to be had)

      • 91B20 1stCav (AUS) says:

        “…isn’t that special?…” – d. carvey

        “…a man hears what he wants to hear and disregards the rest…” – p. simon

        may we all find a better day.

  7. Michael Engel says:

    1) In Apr 2023 Kuroda will snorkel underwater in Sharm El Sheich.
    The BOJ might raise rates moderately, in stepping stones. If Europe enter a recession the ECB will not return to negative rates. The Fed, the ECB will stall.
    2) When all three will have above zero rates gravity between them will
    weaken. The spread between them will be smaller,
    3) Recession might equalize them. It will do the fight for them. They welcome the falling Real M1, up to a point. Rhey will control it.
    4) The liquidity drain was doing wonders to cleanse Sam Bank/ Madoff swamp and few of his friends.
    5) In zero gravity environment, with less friction, central banks will be
    able to return to normal rates and get rid of Druggie zero rates once for all.
    6) Money is more important than rates. Zero rates encourage buybacks and bonuses for jerks.

    • joe2 says:

      “Money is more important” That caught my eye. I remember when, to true innovators, money was not important except as grease for the wheels of their business operation to do what they loved – create something new and expand knowledge.

      To me it’s only FU crap. When you get enough for your freedom and to facilitate what you want to do as a reasonable person you are done.

      For too many it is their ego and their reason for existence. Game tokens in a corrupt power struggle. Pathetic.

  8. Xaver says:

    The stocks of my deSPAC watchlist of 295 names, I stopped adding in April, had an average price of $ 3.84 yesterday, 1 cent above its all time low. Buyers lost more than 60% on average.

    The sheer existence of SPACS shows you what’s wrong in capital markets.

    • Syd says:

      Is there a way for Xaver to share his list? It would be awesome to see the names and total monies lost during this period

      • Xaver says:

        Syd, I don’t know how much money was lost, I did not analyze that. I just added up all share prices and divided the sum by the number of companies. SPACS all start at $ 10 so it’s easy.

        But here you find a list of 356 deSPACs that closed from 2020 to today, all SPACS that completed a merger that is:

        https://spactrack.io/despacs/

    • Marcus Aurlius says:

      SPACs are nothing more than resuscitated, warmed up, dead corpses of the Jesse Livermore and Joseph Kennedy style “pools”.

      Before Jesse & Joseph, William Rockefeller (Brother of Famous Brother J.D.), would get together with buddies and pump and dump stocks through their press releases, etc.

      Before him Cornelius Vanderbilt would do the same with his little club.

      Same old’, Same old’ stunt.

      It is nothing new. It is just another clever way to work around SEC rules.

      • Implicit says:

        Or like putting servers right near the action on Wall St. to front run the orders coming in from everywhere.

    • Old school says:

      Financial industry is going to push securities out depending on incentives Fed and government gives them. Zero rates means the casino is open for gambling.

      Remember how Wall Street was incentivized to generate mortgage back securities. No one on Wall Street went to jail.

      Don’t expect Wall Street to be moral. Their job is to sell securities and it’s up to us not to get fleeced. Savers recapped the banks by getting zero on savings.

  9. Djreef says:

    The trillion$ scavenger hunt comes to a close.

  10. LordSunbeamTheThird says:

    Its like beanie babies. Some people never got out and they have a whole load of forgotten about beanie babies in boxes. Not mentally capable of moving on.

    • Anthony A. says:

      Correct, my wife’s previous boss has a room full of them in “new in the box” condition. It’s her retirement stash for when they come back into vogue again.

  11. Michael Engel says:

    correction : 3) Rhey will control it. The Fed might NOT control liquidity drain. It’s coming too fast for them.

  12. Augustus Frost says:

    “And it blamed its “ability to meet its liquidity needs,” or rather lack of ability, and while at it, it blamed its debt covenants that it cannot comply with.”

    So, it could not comply with its debt covenants even with the lowest credit standards ever?

    The whole “crypto mining” concept is totally stupid. Waste energy (a real resource) to produce nothing.

    Crypto and SPAC symbolize the asset mania better than anything else.

    • Old Ghost says:

      Wolf wrote: “….that it lost $435 million in the third quarter, on $162 million in revenues; and that it lost $1.7 billion in the first nine months of the year, on $519 million in revenues…..”

      Wow. I wonder how much the genius executives of this company were paying themselves?

      • Anthony A. says:

        A lot. That was the plan all along!!

      • Sit26 says:

        Exactly. Check out their accounts payable. A number will be fees for their own companies to be paid at the expense of the SPAC investors. Classic simple method of enriching oneself. The interests of the SPAC are not the same as the interests of the money controlling company execs. Sam BF did that with FTX. Real easy. Merchant banks do it all the time to their investment victims.

  13. Thomas stegelvik says:

    Just saw an interview with Cathy Woods on Bloomberg, she was bullish on BTC saging hashrate was fine etc.
    What will it do for BTC if a lot these mining operations has to shut down?

    Scam
    Public
    Aquire
    Cash

    • Seba says:

      The way I understand it, and I’m no expert, but when enough mining operations go offline the mining difficulty (processing power needed) will be reduced by the protocol, this will lower the cost of mining making it profitable again for the miners still around.

      To me it’s almost like “pump and dump” is coded into this stuff. It also seems like there are 2 worlds, the hard-core believers and the rest of us including all the scam companies where a lot of regular “investors” do business. So I think as these scams die and average Joe loses his “investments” and gives up, the price of BTC will settle wherever all the “believers” dwell. After some downtime the pump and dump cycle will restart. Though I’m not sure the ATH can be seen again anytime soon, that might’ve been dependent on all the excess liquidity we’ve had from low interest and QE, that seems to be gone for who knows how long.

    • Aaron Fairchild says:

      Hashrate is still going higher but that’s not necessarily bullish for the price.

      Higher hash rate basically message more competition for block rewards and the price of the reward keeps going down (price of BTC) so to me this makes it less exciting for miners (more work smaller reward) and that’ll hit a breaking point soon I’d think.

      Also hashrate going up is likely caused by GPUs getting so much cheaper since ETH went to POW and ask the ether miners sold there machines for cheap.

      Cathie will say whatever sounds good to keep getting those flows… Insane that the faucet is still on for her after the past year SMH

  14. Lune says:

    The only silver lining here is that the bag holders likely include a lot of the original SPAC investors and not just retail investors as usual. There were probably lockup periods involved after the SPAC converted which prevented the original sellers from selling. The lockup periods usually last for 6-12 months.

    Unless of course the SPAC investors, knowing how worthless this company really was, specifically did not put any lockup period within its contracts…

    • phleep says:

      A look under the hood at the twisty deals for investors in the DWAC (Truth Social linked) deal, shows one of the scammiest I have seen, with sweet guaranteed pie for whales, utter contempt for the retail suckers.

  15. Cullpax says:

    Kinda funny to see the ad, promoting a betting company, in the middle of the text.
    I am sure there is some correlation between the traits: 1. believer in the cryptocurrency hype and 2. having an account in betting websites

    Off topic so sorry in advance!

    • phleep says:

      1. believer in the cryptocurrency hype + 2. having an account in betting websites = begging to be taken by a rug-pull, by some distant opaque counter-party, with no recourse.

    • Wolf Richter says:

      You must be outside the US. You should not be served that kind of ad in the US because online gambling is illegal in many states, and ads promoting it are illegal in those states.

      • Lisa_Hooker says:

        Passing laws without funding for enforcement is ineffectual. And typical of the US.

      • Cullpax says:

        No you are right Wolf, based in Greece. These ads usually come with disclaimers.
        The ongoing World Cup only exacerbates it.

  16. Frank says:

    If enough miners go out of business, do bitcoin transactions slow and the exchange cease to function? The whole system depends on transactions executed by the miners.

    • phleep says:

      And if there is a finite number of bitcoins to be mined, what happens to the system when that number is reached? What is the incentive to keep the plumbing running?

      • Brian says:

        In addition to new coins being minted, transactions have a fee that is also awarded to the successful miner. Thus, once all bitcoins have been mined, miners will continue to be rewarded with these fees.

    • Brian says:

      Some miners will go out of business and the remaining ones will handle the load. The “difficulty” will be reduced because there are fewer miners and the rate of new blocks recording all the transactions will continue at roughly the same pace.

      In short, the network may slow slightly in the short term (difficulty is recalculated every two weeks) but will continue as it always has. There is no existential threat to the network.

  17. Hillel says:

    I once had a chat “discussion” on LinkedIn with a guy who thought crypto was a great idea and had a bright future. It’s the only discussion I ever engaged in on LinkedIn. I just said that crypto won’t work because it has no intrinsic value and that’s the argument. I don’t remember his argument.

    • Brian says:

      The argument is: Many assets have no _intrinsic_ value. What’s the intrinsic value of a Picasso or Superman #1? The latter sold for $5.3M. Even USD has no _intrinstic_ value.

      But those assets have value to other people and thus other people are willing to pay a price for them. (Price is what you pay; value is what you get.)

      So the question with any such asset is what value it has to other people. Bitcoin and other big cryptocurrencies do have uses, fewer than USD but more than Superman#1.

      The price of bitcoin exploded because of speculators but that’s not unique to crypto. Don’t believe the hype but don’t believe the FUD, either.

      • Augustus Frost says:

        The price of Superman #1 is due to cultural factors. Same for a Picasso. The price of either has no relation to any potential utility and there is no analogy to BTC whatsoever, other than both are both supposed “investments”.

        Whatever utility BTC has, it’s totally disproportionate to the price. It’s not a real currency as it can’t be used to buy hardly anything and it’s an erratic store of value.

        It’s a speculative instrument that only has its current value due to the broader asset mania. It’s already crashed and the asset mania isn’t even confirmed as over.

        • Brian says:

          Price stability is a big problem for crypto, I agree. Right now it’s not very useful as a currency because of that. I also agree that it’s price is way out of line for its current utility. It’s almost entirely speculation.

          But aside from it’s “price”, it does have some “value” to some people.

          I’d like to think that price stability can be achieved. If so, it could become something truly useful on an everyday basis and would quickly expand to more markets. Unfortunately, until that happens it’s only really good for speculation and speculation runs counter to price stability.

        • Lisa_Hooker says:

          @Brian –
          I have heard that you can buy a pizza for 10,000 Bitcoins, but I don’t know what size pizza. Obviously Bitcoin is not without some kind of “value.”

        • Jcohen says:

          Bitcoin is the ideal medium to launder money. Its ownership is not revealed to the Feds , so there are no taxes and no reporting requirements above certain thresholds . It did does have the physical problems associated with large amounts of cash . Large sums can easily be transacted with little effort .

      • Moosy says:

        The picasso is something you can hang on the wall and enjoy and more likely brag about at your nect cocktail fundraiser party

        That bitcoin with it’s deceptive gold coin as image, when you print out those 10 pages of numbers and digits, not sure you lije hanging that on the wall. And you still have to pay for the print and paper

        • Brian says:

          No, you can’t hang a Picasso on your wall, especially if you brag about it. It would be quickly stolen or damaged. You either have to hide it or pay huge sums to protect it. Similarly, you can’t sit on your deck and read your Superman#1 as that would damage it and decrease its value.

          A museum or gallery may gain utility from master works only because they charge people admission to see it. Individuals buy them only because they personally value them or because they are speculating with them. So, no real difference there.

        • A Picasso does not use up as much energy as a small country.

          A lot of people are in corrupt-o-currency because “number go up”. There are already plenty of assets you can buy because “number go up.” It’s just lottery tickets for people w/college degrees who should know better.

      • Sit26 says:

        Sam BF explained it simply and elegantly with his dollar in a box analogy. Look it up.

        • robert says:

          Speaking of Sam BF, he’s a guest speaker at the New York Times Deal Book Summit. He’ll be interviewed by Andrew Sorkin.
          The list of prestigious speakers:

          Eric Adams, New York City mayor
          Ben Affleck, Artists Equity C.E.O.
          Sam Bankman-Fried, FTX founder
          Gerry Cardinale, RedBird Capital Partners founder, managing partner and C.I.O.
          Shou Chew, TikTok C.E.O.
          Larry Fink, BlackRock chairman and C.E.O.
          Reed Hastings, Netflix founder and co-C.E.O.
          Andy Jassy, Amazon president and C.E.O.
          Van Jones, CNN host, author and Dream.Org founder
          Scarlett Lewis, Jesse Lewis Choose Love Movement founder and mother of Sandy Hook shooting victim, Jesse
          Mike Pence, 48th vice president of the United States and author of “So Help Me God”
          Benjamin Netanyahu, former Prime Minister of Israel, current leader of the Likud party
          Priscilla Sims Brown, Amalgamated Bank president and C.E.O.
          Secretary Janet L. Yellen, U.S. Department of the Treasury
          President Volodymyr Zelensky of Ukraine
          Mark Zuckerberg, Meta founder, chairman and C.E.O.

        • Wolf Richter says:

          Could we just do a dragnet operation and arrest them all?

  18. phleep says:

    Rather than Henry Ford or John Pierpont Morgan, in this era, we got Elizabeth Holmes and Sam Bankman-Fried. Bankman-Fried as an example is a total piker next to even Enron. His uncombed hair, smudged t-shirts and perpetually wagging foot, are emblematic of his whole approach of any sort of diligence. So too with these SPACs.

    SPACs partook of Ponzi dynamics from the start. Marketing overwhelmed all substance, with a veneer of open contempt for the old school diligence. As with crypto, the idea was not value, but flipping to the next sucker. Many chat groups were excitedly, openly playing this, utterly fake companies and penny stocks or sh!tcoins whipped up out of nothingness, just to flip. The level and scale of vapidity (versus any substance) is a new height (excepting maybe the South Sea Bubble, circa 1720).

  19. cas127 says:

    The lead underwriter info on any IPO (including SPACs) is pretty widely available.

    There would be some public usefulness in compiling a list of repeat offenders among underwriters, financial firms that have repeatedly brought CrapCos to market.

    I wonder if somebody has already done so on the net.

    • Wolf Richter says:

      A SPAC has a lead underwriter leading up to its IPO (which occurs long before it has a merger target). After the IPO, the SPAC sets out to find a merger target. Months later, or more than a year later, it may announce an agreement with a company to buy it. So then that deal takes months to complete. And in the end, the shareholders of the SPAC vote for or against the merger. If they vote for the merger, the next day, the SPAC’s shares represent the merged company, and that merged company is now publicly traded. There is no lead underwriter or any underwriter involved. But there are “financial advisors.”

      The underwriters of the SPAC leading up to its IPO have nothing to do with the merger. But it could be that the lead underwriter is Goldman; and then a different group of people (the M&A folks) at Goldman act as financial advisors for the merger. But it could be another firm that does that.

      In terms of Core Scientific, the announcement of the merger that I linked in the article (you can click on it) details the advisors for the merger:

      “Barclays Capital Inc. is serving as financial and capital markets advisor to XPDI. XMS Capital Partners, LLC is serving as financial advisor to XPDI in connection with the Transaction. Kirkland & Ellis LLP is serving as legal advisors to XPDI.

      “Evercore is serving as financial advisor to Core Scientific in connection with the Transaction. Cooley LLP is serving as legal advisors to Core Scientific.”

      • Sit26 says:

        “Why would I pay a consultant to give me the wrong answer?” Pointy haired boss.

      • cas127 says:

        All the underwriters/advisers along the chain (initial SPAC, merger consummation, etc) bear some/a lot of responsibility – they are the ones flogging these entities to their poor, benighted clients…that’s where the money is coming from.

        (Or the second order financially raped – the taxpayers behind CALPERS, etc)

        A “League Table of the Damned” would track the habits of the vampire squid and provide the most definitive evidence for permanent indictment.

        It (accountability) doesn’t happen because the consolidation of major, major players on Wall Street makes it hard for the street to conceive of anything, no matter how egregious, taking Goldman, etc down…”How would Wall Street function without X?”

        Personally, some of these (large) firms are such perpetual bad actors/gross incompetents that I don’t understand how their documented history and repeatedly burnt HNW customer bases have not destroyed them via litigation or simply permanent soiled reputations.

        Simply, “Who buys this sh*t from these sh*ts?”

  20. Marcus Aurelius says:

    I got it from a crypto friend,……………
    Who, ………………
    go it from a crypto friend,……………….
    Who……………….
    said your crypto was messing around ….hm hm hm.

  21. David Hall says:

    The price of bitcoin went from about $64,000 to $17,000 since November of 2021.

    The price of electricity went up 14.1% over 12 months as reported for the month ending October 2022 (BLS). Electricity fuels processors used to make bitcoins.

    Madoff died in prison for his ponzi scheme.

    • Seen it all before, Bob says:

      You could also say Bitcoin went from 8K in January 2020 to 17K now. Excellent ROI.

      Is the Ponzi still alive?

  22. Justinian Forethemoney says:

    Reminds me of a few scrabble variants of “Satoshi Nakamoto” that were being thrown around in the heyday (around 2017):

    A hook to Satanism
    So, a man took a sh*t
    I am NSA, took oaths
    Ma, I took NSA’s oath

    And some choice jargon from the original Buttcon White paper of that author published on Halloween 2008:

    “To facilitate this without breaking the block’s hash, transactions are hashed in a Merkle Tree with only the root included in the block’s hash.”

    “implement the proof-of-work by incrementing a nonce in the block until a value is found that gives the block’s hash the required zero bits”

    “obtain the Merkle branch linking the transaction to the block it’s timestamped in ”

    “If a majority of CPU power is controlled by honest nodes, the honest chain will grow the fastest and outpace any competing chains.”

    • Brian says:

      Why are you quoting something of which you obviously have no understanding?

      These are technical reasons as to why the blockchain itself is secure. It has absolutely nothing to do with the actions of financial institutions. They’re separate entities, just like USD and your local bank are separate even though they work together.

      Do not confuse the actions of FTX with the behavior of BTC. They’re not the same thing.

      • Si26 says:

        Dollar in a box, Brian.

      • Implicit says:

        Is there a historical ledger of when each bitcoin was coded? I n other words, could value of a bitcoin be worth more as a relic from the beginning of the ledger? Some coins are worth a lot more than their initial value

      • Why do crypto bros think people do not like corrupt-o-currency because we do not understand it? It may not have occurred to you, but many of us want nothing to do with corrupt-o-currency because we DO understand it.

    • David Hall says:

      You might need a Ouija board to figure out where the hacked and stolen bitcoins were hashed I mean stashed at. That does not work either.

      They will have to create new bitcoin to pay for bitcoin miners’ rent that is rising faster than the value of a block chain exchange..

  23. electroneuter says:

    “People should be going to jail for this but won’t. And the SEC won’t do anything either because it has been asleep for years”

    Generally, I disagree that people should go to jail over this or that SEC should get involved at all. Crypto people mostly delivered what they’ve promised – you got your immutable blockchain entry, the rest is all of us speculating together: I’ve speculated that it is a mirage and it will all crash and burn, some speculated it is a financial instrument going to the Moon. Regardless, SEC should let the mofo burn, it’s not like they have the brain/imagination/man power to regulate this space more than they can regulate the Neverland and Peter Pan. Their hands are full with securities.

  24. Michael Engel says:

    The Wolf family won a FIFA game.

  25. CreditGB says:

    “…..using low cost, clean and renewable energy for a growing, global decentralized finance industry.”

    Isn’t German industry shutting down at least intermittently with inconsistent, and power shortages as they simultaneously shut down reliable coal, gas, and nuclear, and shift to notoriously fickle solar and wind?

    My 2 month observation data from Wind Europe so far shows the combined onshore and offshore wind generation is running at an average 32% of installed capacity since October 1st when I first started looking at actual production instead of the hyped “capacity”. If my car got only 32% of dealer’s advertised MPG, I’d get rid of it.

    I guess the religion of the Utopians is as solid as ever, as are their investing policies.

  26. joe2 says:

    Wolf, care to do an analysis on who your “paths of glory” financial picks have made political donations to? And why?

    • Wolf Richter says:

      That’s always an interesting aspect, not just for the Imploded Stocks, but for all of Corporate America. All the big ones are massively greasing palms on both sides. I get a newsletter that discusses some of it, but it’s just how things are done here. Everyone knows it, much of it is even disclosed. And it’s infuriating every single day. But it’s not in my wheelhouse.

  27. CreditGB says:

    Huh, sounds familiar? What do these “exchanges” do to “show” their reserves? No need for paper checks, just do it electronically. Using enough affiliates with one day loans, temp transfers and the like, you could make $100k look like many millions, no sweat. Particularly if you also run “the bank” What a scheme!!

    “Types of Check Kiting
    Circular Kiting —- This form of kiting uses multiple accounts at different banks. The accounts can both be in the same account holder’s name, different names, or even involve a group of people. The account holder writes and deposits checks (often of increasing value) from one account to another to create the appearance of a balance.”

  28. Bob says:

    Crypto will go down as the greatest financial fraud / ponzi-like scheme in the history finance.

  29. billytrip says:

    Is there any truer cliche? “A fool and his money are soon parted.”

    I have no problem with fools but greedy fools screw it up for everybody. Karma is a biotch.

  30. gary2 says:

    But but but…you can buy a banana with it!

  31. Xavier Caveat says:

    Heard there was a cave-in @ the Bitcoin mine and 653,241 investors are trapped.

  32. AverageCommenter says:

    The Money printers cut the spigot off. If it’s no water going into the soil, no crops are going to grow regardless of which seeds are there. Even gold & silver stocks/miners dropped during the great inflation of the last two years. Instead of focusing attention on these exotic type of investments like bitcoin we should be more shocked and appalled on how they have controlled the price of gold and silver during this time period. Neither covered the losses to inflation & it is obvious without that they are controlling the price of precious metals. No free market at all

  33. Island Teal says:

    1. Why do you think Gary Gensler (cueball) was appointed as head of the SEC?
    2. Why do you think Maxine Waters remains as head of the House Finance committee?
    3. Who are Sam B Fried parents?

  34. polistra says:

    I’m going to use as much electricity as an aluminum smelter, but instead of producing aluminum I’m going to run math puzzles on a computer for my own amusement. Give me a billion dollars NOW!

    • Brian says:

      It wasn’t for amusement. It was to generate assets (regardless of your personal opinion of that asset) that could be sold at a profit. Unfortunately, the sale price of the asset is highly volatile and margins are thin. Not really a good business model.

      Note that Ethereum recently switched away from proof-of-work and its power cost has been reduced by somewhere around 99.9%. (Probably a couple more 9s there but it’s impossible to measure accurately.)

      • “It was to generate assets (regardless of your personal opinion of that asset) that could be sold at a profit. ”

        Like growing tulips a few centuries ago.

        Bitcon mining is like filling your bathtub with cement and demanding the world give you money. Nobody owes a miner anything just because they were stupid enough to get into this.

        • Lisa_Hooker says:

          You just don’t understand. Mining takes a transient and ephemeral thing like electricity and turns it into something real – like a string of pseudo random 1’s and 0’s. /s

      • eg says:

        “Proof of stake” (which is what Ethereum switched to from “proof of work”) is just plutocracy.

        Screw that.

    • TheAltonRoute says:

      Can I take pictures of a burning pile of wood and use them as money? The ashes are my proof of work.

  35. Xavier Caveat says:

    I’m putting all my dough in RichterCoin, which goes up when there’s a good sized earthquake.

  36. Khowdung Flunghi says:

    COMING SOON TO PAY PER VIEW — “Tales from the Cryptos”. Sign up now to get your free personalized mug and hat! (Smooth) Operators are standing by! Call in the next 15 minutes and we’ll double your order. Just pay separate shipping and handling. Call 867-5309 and ask for Tommy Tutone.

    • Brian says:

      That’s Jenny’s number, not Tommy’s.

      • khowdung Flunghi says:

        Ah, you’re right! Thanks for the correction! (It was early…)

        Protip: Whenever you’re at the checkout and it asks for you phone number, the local area code + 867-5309 usually works!

        Happy T-day to everyone!

    • Marcus Aurelius says:

      Can I pay in Bitcoin?

  37. YuShan says:

    Not only have they destroyed an immense amount of investor capital, they have also in their short life wasted an enormous amount of real world resources.

    There is an energy shortage and (until recently) a chip shortage too. All these wasted resources could have been used to produce stuff that people need. This is another example how destructive bubbles are for the real economy.

    • Si26 says:

      Not one cent of investor capital has been “wasted”. it has been reallocated. The money always, repeat, always, goes somewhere. If it suits the investigators, they can track it. If it doesn’t, they do’t.

      • 91B20 1stCav (AUS) says:

        Si – similar to the discussions I’ve had with those who complain about ‘firing $ off into space!’. The look when they realize the money stayed here on the Earth is priceless…

        may we all find a better day.

  38. Cody says:

    I don’t see how regulation would have helped. The entire crypto movement was just another tower of cards built on top of the non-sense that was zero or negative interest rate fiat currency.

    It did exactly what it’s promoters suggested, and gave investors something to speculate on when they were facing negative real yields.

    Now that the money machine has been shifted from “print” to “shred”, well, the towers of cards have become unstable. Crypto is only one of the paper monuments to fall. Unprofitable “tech 2.0” companies based on “tech adjacent” ideas re coming apart as well as they suddenly are forced to deliver profits.

    The Federal Reserve will over correct, and raise interest rates up too high. That is are reliable and regular as the rising of the sun each morning. And once it is painfully obvious that they have done so, they will pivot. And then the markets will go from “risk off” to “risk on”, just as they have done with every bust turns to boom. We’re just some point away from that point in time now.

  39. Kye Goodwin says:

    I notice that perpetual motion machines are making a comeback on the internet. Some are very clever. It’s often hard to see how they are cheating, but we can know that they certainly are cheating because the science of Physics has understood that this is impossible for a long time.

    Similarly with Crypto, there’s no need to contemplate the details to know that it is fundamentally a scam.

    • Brian says:

      Good grief! The big coins such as Bitcoin and Ethereum are NOT a scams! They are exactly, reliably, what they claim to be.

      There are plenty of people who have created scams around them and more people that believe a shedload of untrue things about them and even more people who are just following the trajectories without knowing a damned thing about them.

      Companies will fail. Executives may go to jail. The price people are willing to pay for them will go down.

      But the tokens themselves will continue on working exactly as they should regardless of what those silly humans think and do. You can count on that.

  40. Michael Engel says:

    1) After NAFTA our elite prof designed an econ 101 plan to save the
    the crumb people in the devastated areas. It didn’t work.
    2) In 2020 the gov used the same plan to save the whole country.
    3) US gov transferred money to shingle mums, small businesses and
    every US citizen, ex the rich.
    3) A Real M1 bubble born. We are feeling the after shocks of the injection shots.
    4) The Fed might be able to control the liquidity problems they created with another econ 101. But what if they can’t, what if it’s down thrust is too fast. After plunging to the bottom the elite econ 101 prof will take care of our severe injuries.

  41. Howard says:

    Something named CORZ got corzined and there’s people asking how come? Wild.

  42. msergiob says:

    No F.R.S bailouts for the competition!

    Comparing with Credit Suisse it’s just funny to watch

  43. SpencerG says:

    Isn’t this the moment when some Bay Area VC swoops in and buys the whole lock-stock-and-barrel for pennies on the dollar in the belief that this company will be a “unicorn” very soon?

    • Wolf Richter says:

      They know better. If they want the data centers and whatever IP the company has, they can buy them in a bankruptcy auction without having to take on all that debt and other garbage that the company has.

  44. Wendy says:

    Can someone please explain why Bitcoin has not already crashed to less than $1000? I know it has undergone a huge drop over the past year, but what keeps it at $16K? Hodlers? Large holder manipulation propping it up? If tulips went to $2 per bulb, why is BTC able to defy gravity? I know there will be a lot of you that will chime in saying it should go to zero, and it has no inherent value, but if I want to join the speculative frenzy, why do I have to pay so much for something that is supposed to have no value?

    • James says:

      Good question I’m sure everyone has their opinion of what a single unit is worth including Cathy Woods yesterday saying $1M/coin. Looking at a long term chart the positive thing perhaps is it is still around and not Zero yet. Perhaps more sideway/lower action perhaps it is forming a floor.

    • SHOTT3R says:

      BTC will never go to zero as long as it is useful to criminals for doing criminal things. Money laundering, human trafficking, drugs and arms sales, murder for hire, etc, will always need a funding source that is relatively hard to trace.

  45. Beardawg says:

    Crypto is fascinating. Never could understand it beyond an alleged alternative to fiat (BTC anyway). Loved that concept and hope beyond hope that it won’t die. Maybe if mining can become 100% solar powered somehow…..maybe.

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