Will 2023 bring more crypto bankruptcies to weed out ‘the pumps and the frauds’?

The crypto industry had a rough go of it in 2022, with crashing cryptocurrency prices and a series of catastrophic bankruptcies.

Since last January, the global crypto market cap has sunk nearly 65%, falling from $2.2 trillion to $803 billion, according to CoinMarketCap. It had previously reached a peak of almost $3 trillion in November 2021.

Chad Harris, chief commercial officer of Riot Blockchain, which is building a crypto mining facility in Corsicana, felt the change in industry sentiment this year, he said at a recent Texas Blockchain Summit.

“Two years ago, this audience was packed,” he told attendees in November. “Today this is an audience full of passionate people who believe that they can actually facilitate what they tell the public. I think it’s important because every single time one of us fails in a disastrous way, it affects every one of us in this room.”

The challenging year included the collapse of cryptocurrencies Luna and Terra, as well as the bankruptcies of key crypto lenders Voyager and Celsius Network in July. November saw two more high-profile companies bite the dust as crypto platform FTX filed for bankruptcy, leading crypto lender BlockFi to follow suit.

The latest in the string of calamities came on Dec. 21 when Austin-based crypto mining company Core Scientific filed for Chapter 11 less than a year after going public last January, brought down by rising electricity rates and the falling price of Bitcoin.

So what does all of that mean for a state that has openly embraced crypto companies?

“The sentiment is we’re disappointed in FTX, but we’re resolved and optimistic about the future of the industry,” Texas Blockchain Council president Lee Bratcher said the summit. “We’re rolling up our sleeves and moving forward.”

In September, cryptomining data center operator Compute North, which had two facilities in Texas, filed for bankruptcy protection. The struggling company sold its Big Spring operation to Foundry Digital in November.

While Compute North was the state’s only notable crypto bankruptcy this year, some Texas crypto miners have had to curtail operations to deal with the downturn, Bratcher said.

“I can’t say names, but it’s a small number,” he said. “Most are at full steam.”