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U.S. Mining Company Marathon Now Holds 8,133 BTC. And They’re Not Selling It

In their December report, Marathon Digital Holdings announced their total BTC holdings. And assured their investors that they were not selling any of it any time soon. This is particularly interesting considering the company bought “a record number” of S19s in December. Reportedly, they got a giant loan using Bitcoin as collateral. An operation we’ll see a lot more in the near future throughout the industry. 

The report quotes Fred Thiel, Marathon’s CEO, in a celebratory mode. “2021 was a transformative year for Marathon as we increased our hash rate 1,790% and increased our bitcoin production 846% year-over-year to 3,197 self-mined BTC.” Staggering numbers that show the size of the Bitcoin mining business.

As for their plans, the report says:

“The Company last sold bitcoin on October 21, 2020, and since then, has been accumulating or “hodling” all bitcoin generated. As a result, Marathon currently holds approximately 8,133 BTC, including the 4,813 BTC the Company purchased in January 2021 for an average price of $31,168 per BTC.”

Of course, they’re not alone. NewsBTC documented the trend throughout the whole year. 

Most Miners Are Holding Strong

One of the first persons to spot the trend was Lex Moskovski. In February, the analyst reported on “the first day since Dec, 27 when Miners Position change turned positive.” 

Approximately four months ago, NewsBTC used data to find a possible explanation:

“Data shows that miner profitability has dropped in comparison to the last time that bitcoin was at this price. The profitability for bitcoin back in April at $50K had been 40% higher than it is right now when bitcoin hit $50K again. This means that miner profitability is hitting the lows at all-time highs.

This drop in profitability has seen miners refusing to sell the BTC they are rewarded with for mining blocks. Instead choosing to hold these coins in wait for much higher prices.”

Miner profitability might be decreasing, but, the business is still a long way from turning red. Especially for a giant operation like Marathon. In a recent interview that NewsBTC reported on, Fred Thiel said.

“Thiel expressed that, factoring operational mining costs (energy plus hosting), Bitcoin’s breakeven rate is roughly $6,500, meaning that the digital coin would need to drop at least 80% for Marathon to face challenging difficulties.”

Less than three months ago, NewsBTC reported on another set of data that showed the same phenomenon:

“As pointed out by a CryptoQuant post, BTC miner reserves continue to trend sideways amid the coin’s strong move up. The “miner reserve” is a indicator that shows the total amount of Bitcoin that miners are currently holding in their wallets. An increase in the metric’s value suggests miners think the coin’s value will go up in the near future, hence they are stocking up on it.”

BTC price chart for 01/05/2021 on FX | Source: BTC/USD on TradingView.com
The Marathon Mining Company’s Future

The company’s recent billion-dollar investment is a play for the future. Especially considering just when those machines will arrive.

“On December 23, 2021, Marathon announced that it had entered into a contract with BITMAIN to purchase a record number of ANTMINER S19 XP (140 TH/s) bitcoin miners, all of which are currently expected to ship from BITMAIN between July 2022 and December 2022.”

The chip shortage is real, people. If an order this size can only be fulfilled in six to twelve months, something’s up. Also, by the looks of it, the ASIC manufacturing business might be even more profitable than Bitcoin mining.

Featured Image by Mārtiņš Zemlickis on Unsplash – Charts by TradingView

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Why Marathon Is Comfortable With Bitcoin Plunging, Says BEP Is $6,500

Marathon Digital Holdings’ (MARA) Fred Thiel said that Bitcoin price would need to drop 80% for the coin to stop being profitable for the company thus entering a challenging situation. Marathon is not worried about the past week’s dip.

During a Bloomberg QuickTake Stock interview, Fred Thiel, Las Vegas-based company’s chief executive officer of Marathon, expressed assurance for Bitcoin’s future and stated that Bitcoin mining is “obviously a very profitable business”  and the company can “ride this market for quite a long time.”

Thiel expressed that, factoring operational mining costs (energy plus hosting), Bitcoin’s breakeven rate is roughly $6,500, meaning that the digital coin would need to drop at least 80% for Marathon to face challenging difficulties, so the price of Bitcoin plunging under $60,000 still translates into profits for them.

What’s not in that cost, if you would, is the depreciation in the miners that we buy. We depreciate our miners over five years, so the payback on that is less than a year at today’s margins. (…) We are a very small team from an operational overhead perspective, so that gets covered very quickly.

Thiel stated those costs are a very comfortable place for the company to be at and believes that Marathon is “one of the most efficient miners in the industry today” because of their agile model that focused on investing in “the miners that produce the maximum return”.

Related Reading | Marathon Digital Holdings Reported A 17% Spike In Bitcoin Mining

Are Miners Selling Their Bitcoin?

Amidst Bitcoin’s bumpy week, speculative comments on social media say that many miners have been selling their BTC the past few days. Bloomberg reporters asked Thiel about the company’s own decision after seeing that the coin dropped below 60k. Thiel responded that they are a long-term holder of Bitcoin and are not planning on selling.

We went into the market in January and bought $150 million of Bitcoin and investment has paid off very handsomely for us. We bought it at an average price of $31,000. So Bitcoin where it is today has paid off very nicely. But we intend to be a long-term holder.

Bitcoin trading at $57,156 in the daily chart | Source: BTCUSD on TradingView.com

Thiel shared the company is optimistic about Bitcoin’s future. They firmly believe that “as a limited supply asset” its value and popularity will keep on rising, and the daily headlines “about new use cases and more uses” backs that optimism.

He also called the U.S. “a very interesting center for Bitcoin mining” because of its excess of energy, opposed to Europe’s situation, and explained that “Some Bitcoin miners need to sell their Bitcoin holdings just to cover their operations”, not worried about the speculations.

Related Reading | Bitcoin Mining Raises Marathon Digital’s BTC Holds To $457M

What’s The Future Of Marathon’s $650M Offering

After Marathon’s debt increase of $150 million that aggregates to the previous $500 million offering size, Thiel shared the decision was taken in order to have “cash on the balance sheet” and stay in “a position of liquidity” so they can potentially take advantage of opportunities in the marketplace that could accelerate their growth, like buying more miners, miner companies that could grow their mining capacity, or invest on improving their mining operation’s energy efficiency.

He further stated that the company is not interested in using the bonds to buy Bitcoin in the open market because they produce it, “unless there are some pricing opportunities” like a $10,000 drop, but they would still be carefully looking into the projections since they want to be “very good custodians” of their shareholders’ capital.

Marathon Digital Holdings, Inc. shares at $51,46 in the daily chart | Source: MARA on TradingView.com

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Investing In Bitcoin Mining Businesses Is Also A Sign Of Institutional Acceptance

Last quarter, the New Jersey Pension Fund invested heavily in two Bitcoin mining giants. A small step for institutional investors, the move might represent something much bigger. There’s a hunger for Bitcoin exposure at the highest levels, but just owning the asset might be too risky or inconvenient for some of those big players. And, until the US government approves the long-awaited Bitcoin ETF, miners provide a much safer target. 

Related Reading | Marathon Digital Holdings Reported A 17% Spike In Bitcoin Mining

According to Coindesk:

The state-managed pension ended June with $3.66 million in Riot Blockchain (NASDAQ: RIOT) and $3.39 million in Marathon Digital Holdings (NASDAQ: MARA), according to disclosure documents.

New Jersey’s Common Pension Fund D has $30 billion in total assets for state employees.

The New Jersey Pension Fund’s intent is clear, and they put their money where their mouth is. However, is there a reason that explains why they don’t want to hold the asset? A legal reason, perhaps? The polemic Michael Saylor explains their rationale in this tweet: 

Many institutional investors find publicly traded Bitcoin miners to be attractive investments because they want BTC exposure but prefer to hold securities rather than property due to tax, accounting, & business considerations.

So, there are several reasons besides Bitcoin’s volatility. Nevertheless, there’s a hunger.

RIOT price chart - TradingView

RIOT price chart on Nasdaq | Source: RIOT on TradingView.com

Is Bitcoin Feasible As An Institutional Investment?

Bitcoin is maturing and spreading. The title phrase is the same NewsBTC used three years ago in an article that came to the conclusion that the asset wasn’t ready. We said:

In its current state, the market is highly speculative, with a majority of investors looking to make a quick buck. Institutional investors have seen that, and have mostly shied away from opening their wallets for the industry. These investors are looking for long-term returns, securing the trust of consumers over time rather than making a quick buck.

The tables turned. The situation changed. At the present, we are in an era in which some of the more innovative institutions already invested and drove the price to insane all-time highs… only to take their earnings and let it drop again. In any case, Bitcoin is proving its worth as institutional investment. About this situation, NewsBTC said:

These high wealth players with decades of market experience and all kinds of tactics on their side were paramount to driving prices up to $60,000 per coin. Unfortunately, the data above suggests they were also instrumental to the selloff that left retail traders with a bloody aftermath.

Related Reading | Brazil approves Bitcoin ETF – SkyBridge files for its own

What About a Bitcoin ETF? Is That In The Cards?

The only factor left unexplored is the possibility of a Bitcoin ETF in the US. As you should know, every financial institution and their mothers applied, and some of them have already been rejected. NewsBTC quoted Hester Pierce, Securities and Exchange Commission (SEC) Commissioner, who said about the situation:

(Institutions) want access to crypto through a regulated market. It makes sense for us to consider how to do that (…). We’ve dug ourselves into a little bit of a hole. A lot of people are looking for a way to access the asset class. We waited a long time to approve this kind of product.

Sadly for us, we’re still waiting.

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