Bitcoin miners stung by price drop but focus on tech

One of the US’s largest publicly traded crypto mining companies showed how well it was faring during the rough months of April through June. It was mostly not good.

Why it matters: Mining companies are considered the last line of defense and are often the last to sell amidst downturns because their business models can withstand the volatile fluctuations of the digital assets they mine with powerful computing equipment. But they’ve been showing signs of stress lately.

Driving the news: Marathon Digital Holdings announced yesterday that second-quarter losses widened to $191.6 million, in large part due to a $127.6 million impairment on its bitcoin holdings as the Prices fell by 56% during this period.

  • But it increased its bitcoin holdings to 10,127 BTC and produced 707 in the quarter — an 8% increase from the same period last year, but a 44% decline from the previous three months.

Details: It suffered from operational challenges related to rising energy costs, maintenance issues, and weather conditions that affected production.

  • Drilling rigs at Marathon’s Hardin facility in Montana experienced maintenance problems and were then taken offline due to a storm.
  • The company also experienced delays through its host Compute North in Texas.

Based on the numbers: Marathon posted revenue of $24.9 million in the second quarter, down about 15% from the prior-year quarter of $29.3 million.

  • Cost of sales — energy, hosting, and other expenses — increased to $16.7 million compared to $4.1 million in the year-ago period.
  • The company also recorded expenses totaling $207.3 million related to its investments in its mutual fund and impairments of its digital currencies.

The big picture: But perhaps the worst is in the rearview mirror as the mining giant continues on its ambitious trajectory of increasing its hash rate to 23.3 exahash per second, more than five times its processing power of around 4 exahash at the end of April (the hash rate of a miner ). is a measure of its efficiency).

  • Fred Thiel, Marathon chairman and CEO, said during the company’s conference call that the prospects for the company’s business are looking brighter.

what others say: In general, the economics for mining have improved recently, DA Davidson analyst Chris Brendler tells Axios.

  • “Bitcoin prices are recovering and network hash rate growth has slowed somewhat,” says Brendler, adding that public companies Marathon-sized still appear to have financial flexibility — a key concern given the onset of crypto winter .
  • “The capital markets are not completely closed to these people,” he says.

What you say“Given the fundamentals we laid during the quarter and the progress we’ve made since then, we are optimistic that Marathon’s operational and financial position is improving,” Thiel said in a statement.

  • He highlighted new, more powerful devices that would come online to help fuel the expansion plans.

Between the lines: Greg Lewis, an analyst at BTIG, elaborated on the company’s exit from its Hardin facility during the conference call and asked what it would have cost to move its facilities rather than sell them and replace them with newer equipment elsewhere.

  • “The miners in Hardin, if you look at our files, our cost of acquisition was somewhere in the low $20 per terahash, so they could be sold for a small loss or almost breakeven,” Thiel said in response to the question.
  • “The cost of moving if we were to move would be $1 million to $1.5 million. We focus on using the latest machinery so we can break away from Hardin. So that we can move on,” said Thiele.

what we observe: Thiel said more than once that Marathon will reach his goal of 23.3 Exahash, but pushed the schedule back to mid-2023.

The final result: Marathon has been experiencing lag for a while. In May, the company still expected to achieve its long-term goals by early 2023, as an investor presentation shows.

What’s next: Peer mining company Core Scientific will report after the market close on Wednesday.

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