Marathon Digital ready to deploy ‘dry powder’ in push to double hash rate

Company execs say it plans to draw from its $1 billion in unrestricted cash and BTC to take advantage of opportunities around the bitcoin halving


PHOTOCREO Michal Bednarek/Shutterstock, modified by Blockworks


Marathon Digital is set to utilize the “dry powder” on its balance sheet as it seeks to roughly double its deployed hash rate by the end of 2025.

The company’s balance sheet comprised roughly $1 billion worth of unrestricted cash and bitcoin combined, as of Jan. 31 — $319 million in cash and held 15,741 bitcoin (BTC).

“We intend to utilize it to continue growing our business through organic and inorganic means as opportunities arise,” Marathon CEO Fred Thiel said during the company’s Wednesday earnings call.

Per-block rewards for bitcoin miners are set to decline from 6.25 BTC to 3.125 BTC in mid-April as part of a bitcoin halving event that occurs roughly every four years. This is a scheduled reduction in the bitcoin block reward that has historically influenced the economics of mining activities. When halvings occur, it tends to increase the operational costs for miners, and intensify competition within the sector.

Marathon’s plans to double its hash rate — or, the total computational power used to secure and process transactions on the blockchain — by 2025 suggests the company is taking a proactive stance in an increasingly challenging environment. The halving is expected to put pressure on various firms in the segment, which industry watchers expect to lead to mergers and acquisitions.

Read more: Bitcoin miner consolidation appears imminent as halving looms

Marathon Digital’s energized hash rate was 26.4 exahashes per second (EH/s) at the end of January. The company recently acquired mining sites in Kearney, NE and Granbury, TX in a $179 million cash deal.

“We’re integrating our first major acquisitions and taking direct control of nearly half of our hash rate,” Thiel said on the call. “But we’re only just getting started.”

The mining giant has a path to grow its hash rate by 35% in 2024 and reach 50 EH/s by the end of 2025, Marathon executives said. 

While those targets are based on the company’s current machine orders, “there are opportunities to accelerate the timeline,” Thiel noted.

In terms of housing the additional hash rate capacity, Marathon leaders have noted the expansion potential of its Granbury property. But Marathon intends to also use its balance sheet to expand both domestically and internationally, executives said.

Though a vast majority of the Florida-based company’s hash rate is deployed in the US,  Marathon has expanded to Abu Dhabi and Paraguay over the last year.

Read more: US bitcoin mining giant ‘looking at Africa’ amid expansion efforts

“We believe there exists significant opportunities to develop utility-scale mining operations based on stranded energy outside of the United States, like our UAE and Paraguay sites,” Thiel said. “We will look for more opportunities in places such as the Middle East, Africa, Latin America and elsewhere.”

Growth crucial around the halving

Marathon Chief Financial Officer Salman Khan noted that the upcoming drop in block rewards will force out what he called “inefficient operators.” 

“We expect this slightly will help us gain market share as we go through the halving,” he noted.

Galaxy Digital analysts expect that up to 20% of network hash rate from eight mining machine models could go offline amid the next bitcoin halving. Smaller private operations and miners in areas with higher power costs are at particular risk of shutting down, according to segment observers. 

“Bitcoin mining is a zero-sum game,” Thiel said. “There are only so many bitcoins available per day. And if you’re not out there growing our hash rate, you’re falling backwards.”

Marathon’s revenues increased 229% to $388 million in 2023. Net income jumped to $261 million from a net loss of $694 million the year before.

But Joe Flynn, an analyst at Compass Point Research & Trading, said in a Thursday research note that the firm’s gross mining margin of roughly 52% missed his 57% estimate due to higher power costs. General and administrative expenses of $39 million were well above the firm’s estimate of $21 million.

The stock has been highly correlated to the price of BTC compared to other miners, “but was overextended,” Flynn added.  

The company’s stock price hovered around $27 just before 11 am ET Thursday — down roughly 13% on the day. 

Because Marathon trades at a significant premium to the rest of the space, Flynn noted, it can use its liquidity and stock as currency to pursue site acquisitions, and technology projects.

The company intends to start an at-the-market offering program under which it may offer and sell common stock shares with an aggregate offering price of up to $1.5 billion.

“[Marathon] remains the 800-pound gorilla in the mining space and has an avid retail fan base,” Flynn wrote. “The company remains well positioned through the halving despite its weaker fundamentals relative to other miners.”

Updated Feb. 29, 2024 at 11:50 am ET: Clarified Marathon hash rate plans.

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