Will Marathon Digital sell Bitcoin?
Bitcoin miners have historically sold BTC since they produced it to cover operating costs. But over the last couple of years, a “HODL” strategy has permeated the industry as participants have chosen to pay down debt expenses instead.
Miners provided a lot of bitcoin and equipment-backed financing to raise a total of $ 4 billion in capital for daily expenses as bids to continue raising bitcoin taxes rose in the industry.
While this strategy worked well during the bull market for 2020-2021, as the bitcoin price increased and capital was easier to raise, over-leveraged miners have come under extreme pressure this quarter as the cryptocurrency lost over 70% of its US dollar value.
Consequently, with current macroeconomic conditions weakening companies’ ability to raise capital and a bleeding bitcoin price, many public miners are left with no choice but to give up the HODL mentality.
In May, most public miners began selling significant amounts of bitcoin to pay down debt or recurring costs, and the trend has apparently not died down. While some have only sold their recovered BTC on a regular basis since then, others have chosen to differentiate themselves from some of the coins they had put in the balance sheet in previous months.
In June, Riot Blockchain sold 300 BTC, while CleanSpark sold 328. However, Core Scientific went a little further and dumped 78.6% of its $ 167 million bitcoin holdings, which it said was “used primarily for payments for ASIC servers, capital investments in additional data center capacity and planned repayment of debt. ” The company added that it will “continue to sell self-extracted bitcoins to pay operating expenses, fund growth, retire debt and maintain liquidity.” Bitfarms also sold a significant portion of its holdings – over 3,000 BTC – last month. Meanwhile, Marathon Digital Holdings and HUT 8 continue to deposit monthly bitcoin production in custody.
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Marathon: To HODL or not to HODL
Marathon has been able to keep its bitcoin so far, in part due to its operating structure. Unlike some other large miners, the firm does not seek to integrate vertically; rather, it outsources most of the operations while retaining the ownership of the miners, which only incurs costs when the machines are online and hash.
“I do not have to worry about renting land, buying transformers, buying containers, building buildings, paying deposits to energy suppliers, etc. What we do is agree with a fixed-price hosting provider,” Marathon CEO Fred Thiel told Bitcoin Magazine.
“So our model means that in times like this, we can literally just sit on our miners and, if we have to, operate at a very low cost,” he continued. “Because we do not need to pre-finance these large CapEx [capital expense] investments. So it gives us an advantage in this current market situation. “
While this sleek structure has enabled Marathon, the largest bitcoin holder among public bitcoin miners, to give up selling bitcoin so far, the company may soon start selling some of its produced BTC, Thiel suggested.
The manager explained that while the company is currently one of very few miners who have not sold bitcoin in the midst of a broader market downturn, future market conditions could lead to a change in the company’s strategy.
“If bitcoin remains at these levels, it may be wise for us to at least sell bitcoin while we extract it, enough to cover current expenses,” Thiel said. “We are not currently looking at necessarily selling our stock of bitcoin, but again, if it makes sense for us to do so from a capital perspective, then we would.”
Thiel emphasized that different price action of bitcoin will lead to different actions from Marathon when the company seeks to navigate the current market; management suggested three possible scenarios.
“If the situation remains the status quo with the bitcoin price jumping between $ 18,000 and $ 22,000, there is one strategy. If bitcoin falls below that, there is another strategy. And if bitcoin goes over it, there is a third strategy,” Thield said. and refused to provide further details.
“I just prefer not to go deeper than saying that there may be circumstances where we will sell the bitcoin while we extract it to cover operating expenses, and there may come a point where we will sell some of our stock to cover CapEx if we needed to. “
While a prolonged period of time at current levels may require Marathon to sell its monthly production, as Thiel explained, the company would only be pressured to sell its accumulated BTC and risk losing its status as the largest public miner bitcoin holder if the price started to tick lower . On the other hand, a rally would allow Marathon’s HODL strategy to remain intact.
“It’s just my personal belief that bitcoin is going to continue at these levels until something changes in the macro environment and people are willing to invest in risky assets again,” Thiel theorized.
“And it may come in the latter part of this year or next year, who knows at this point? It’s really going to be very dependent on the Federal Reserve and to what extent we’re going into recession and economics, right?”
