Marathon Digital, Hut 8 Mining Building up Bitcoin Reserves

Two of North America’s largest bitcoin miners, Marathon Digital and Hut 8 mining, are choosing to hold the bitcoin they are producing, and one is now borrowing against its bitcoin to purchase mining equipment. 

Marathon produced 340.6 bitcoins during September, increasing its total bitcoin holdings to 7,035, the company reported on Monday. With bitcoin valued at about $49,100 as of 3:30 pm ET on Monday, the US dollar value of Marathon’s bitcoin holdings currently stand at roughly $345 million.

Marathon holds all of the bitcoin it produces, CEO Fred Thiel told Blockworks in an interview, noting that he expects “great movement” in bitcoin’s price this quarter. Though there has been resistance of bitcoin hitting $50,000 in recent weeks, Thiel added, once it reaches $55,000, he expects the price will likely quickly jump to $75,000.

“By miners holding bitcoin and not liquidating, it creates a liquidity crunch in the marketplace, which goes to help the price of bitcoin,” the CEO explained. “Not that miners are collaborating on this in any way, but I think all miners believe that the price of bitcoin will go up, and by not selling bitcoin, we essentially cause the price to go up somewhat.”

Hut 8 Mining mined 264 bitcoin in September and is choosing to hold all of it, the Toronto-based company announced on Monday. It had 4,724 bitcoins in its reserves, as of September 30, which is currently worth about $230 million.

Last month, Hut 8 also installed 600 servers consisting of 2400 NVIDIA cryptocurrency mining processor graphics processing units (CMPGPU). The company has earned CAD $265,000 (USD $210,000) to date from the deployment.

“We are thrilled with our current amount of Bitcoin held in reserve as well as being ahead of schedule on our commitment to the market to have over 5,000 self-mined Bitcoin by [the] end of Q4,” Hut 8 Mining CEO Jaime Leverton said in a statement.

A company spokesperson did not immediately return Blockworks’ request for further comment. 

The addition of more bitcoin to the reserves of Marathon and Hut 8 Mining come after MicroStrategy CEO Michael Saylor said during the company’s third quarter earnings call that there is a “land grab” to acquire as much of the eventual capped limit of 21 million bitcoin as possible.

“​​If you mine #BTC but don’t sell it, isn’t that the same as buying it?” Saylor wrote in a Twitter post on Monday in response to Hut 8’s announcement.

Saylor’s company purchased 5,050 bitcoins for about $243 million last month, according to a disclosure filed with the SEC. After the purchase, MicroStrategy held 114,042 bitcoins, which it acquired for an average price of $27,713, or nearly $3.2 billion in total, Saylor noted at the time.

In addition to Hut 8 Mining, some of Marathon’s largest North American competitors are Riot Blockchain and Core Scientific. The latter two companies did not yet publicly release their September production numbers.

Marathon’s growth plans

In addition to adding more bitcoin to its reserves, Marathon announced on October 1 that it obtained a $100 million revolving line of credit, secured by bitcoin and USD, with Silvergate Bank. The Las Vegas-based company may use the line of credit for “general corporate purposes” related to its bitcoin mining business, such as bitcoin mining equipment, according to a company statement.

Saylor and Dylan LeClair, co-founder of 21st Paradigm and head of market research at Bitcoin Magazine, both highlighted the agreement on Twitter, with LeClair writing, “This is just the start.”

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The line of credit will be initially available for one year and may be renewed annually. Thiel noted that the agreement with Silvergate gives Marathon the ability to acquire more miners, for example, if there is a compelling opportunity. 

“We want Marathon to be very agile, and to be agile you have to have resources and have the ability to move quickly when you want to,” he explained. “We don’t ever want to be in a position where we’re forced to sell our bitcoin or sell equity at prices that we don’t think are appropriate.”

In terms of growth plans, Marathon announced in August that it had entered into a contract with Bitmain to purchase an additional 30,000 Antminer S19j Pro miners for $121 million. As a result of this shipment, expected to arrive throughout the first half of 2022, the company’s mining operations will consist of more than 133,000 Bitcoin miners, producing about 13.3 exahashes per second (EH/s). 

That forecasted rate would have represented about 12% of the Bitcoin network’s total hash rate of 109 EH/s as of August 1. 

Thiel added that Marathon is focused on teaming up with power companies, which he said would likely become “the single largest group of miners in the world.” 

“The power companies have the biggest incentive into mining, especially [with] renewable energy because bitcoin mining is the perfect baseload for renewable energy installation,” the CEO explained. “We believe that the power companies are the perfect partners for Marathon directly where they provide power and the hosting infrastructure … and then we partner with them on the [miner hardware] and the mining operations side.”

The company previously announced plans to commence installing 73,000 miners at a new 300-megawatt facility in Texas, and will look to expand to other states with a focus on renewable energy sites. Marathon’s goal is to be 100% carbon-neutral with its mining operations by the end of 2022. 

“We may expand internationally. …It’s not off the radar screen,” Thiel added.