According to latest reports, KnCMiner, a bitcoin mining hardware company based out of Sweden, has filed for bankruptcy citing the imminent bitcoin block reward halving and rising competition from miners based in China, Breakit reported.

The news is quite surprising as the startup raised $32 million in venture funding, drawing support from investors including Accel and Creandum.

“Due to high uncertainty regarding the bitcoin block halving that occurs in July, in combination with a continued rapid capacity expansion from our competitors, the company is very unlikely to be able to fulfil its obligations past July. The board therefore took the decision to take the company voluntarily into receivership” – Sam Cole, KnCMiner Co-founder and CEO

The company, however, tried to cut costs earlier in February by laying off around ten employees, constituting a fifth of its total workforce. But failing to keep up with changing market conditions, KNC Group, the parent company, along with its seven subsidiaries, has now decided to file for bankruptcy.

Cole told Bitcoin.com the company was in talks with lawyers and shutting down as much of its business as possible. However, he expressed his desire to continue working in the cryptocurrency space if possible.

Bitcoin Block Reward Halving

Mining is the process of adding transaction records to Bitcoin's underlying public ledger of past transactions – blockchain. Miners currently receive a reward of 25 BTC for successfully processing a block. However, following the halving, the reward will be slashed to 12.5 BTC, which in turn will also cut a miner’s bitcoin income by half.

Speaking with CoinDesk, Cole explained:

"Effectively our cost of coin – how much we produce the coins for – will be over the market price. The price is now [roughly] $480. With all of our overhead, after July, the cost will be over $480. All of the liabilities we’ll have after that time will be too high."

He further added that the decision to file for bankruptcy was ‘pre-emptive’, as the firm wanted to avoid running out of funds prior to the drop in revenue.

KnC said it will now focus on selling the profitable aspects of the company, without disclosing any further details.