Marathon Digital Focused on Organic Growth in Near Term Despite Buying Opportunities

Marathon Digital will likely stay focused on tripling its hash rate organically by the middle of next year — before potentially acting on other buying opportunities among distressed bitcoin miners, CEO Fred Thiel said Tuesday. 

The comments during the company’s earnings call Tuesday doubled down on the executive’s strategy shared with Blockworks last month.

“We’d prefer to buy the latest, state-of-the-art miners, deploy them so we have an energy consumption advantage…and then drive the type of hosting agreements that fit our model,” Thiel said Tuesday. “I don’t see us going and consolidating the industry necessarily, but that being said, there may be unique opportunities and we’ll be open to looking at things.”

For example, Thiel said last month Marathon would keep an eye on cheap assets from struggling miners. The mining rig operator could look to purchase a hosting site, for example, if such a buy made strategic sense.

Industry watchers told Blockworks earlier this month that miner consolidation is imminent as some have reported financial pressures in recent weeks, such as Argo Blockchain, Core Scientific and Iris Energy. 

Marathon Digital posted a net loss of roughly $75 million during the third quarter, an improvement from its net loss of $192 million during the second quarter.

Its stock price, which is down nearly 70% year to date, dropped about 5% during trading hours Tuesday. The stock dipped 0.8% in after-hours trading, as of 5:30 p.m. ET.  

Many crypto-related stocks took a hit Tuesday after Binance CEO Changpeng Zhao said the exchange intends to buy FTX. Coinbase’s stock dropped nearly 11%, for example, while others like Silvergate Capital and MicroStrategy each plummeted about 20%. 

The loss was driven in part by the drop in the carrying value of its digital assets, as well as lower bitcoin production. 

The company produced 616 bitcoins from June to September — representing a 51% from the third quarter of 2021 and a 13% sequential decrease. This was due to Marathon’s exit from its facility in Hardin, Montana and delays in the energization of its site in McCamey, Texas.

Marathon has turned around its lower bitcoin generation so far in the fourth quarter by producing a record 615 bitcoins in October to increase its total holdings to 11,285 BTC.

The company said last week it added about 32,000 miners last month to raise its hashrate to roughly 7 exahashes per second (EH/s). Marathon seeks to hit roughly 9 EH/s by the end of 2022 and 23 EH/s by mid-2023.

“We expect bitcoin to trade in this $18,000 to $22,000 range for some time, and we think we’re very well-positioned to weather that storm and come out the other side very attractively as bitcoin goes up in price,” Thiel said.

Executives said the company would continue holding bitcoin but could look to sell a portion of produced BTC in the future to cover operating expenses.

Marathon Digital competitor Riot Blockchain on Monday reported a net loss of nearly $37 million during the third quarter. Its stock went down about 7% on Tuesday.

Analysts recently told Blockworks that though firms like Marathon and Riot are in strong financial positions to take advantage of opportunities, they expect more suffering to be had before more bankruptcies and acquisitions take place.  

Stronghold Mining and Hut 8 Mining are scheduled to host earnings calls Wednesday at 5:00 pm ET and Thursday at 10:00 am ET, respectively. Canada-based miner Bitfarms is set to report its third quarter results on Nov. 14 at 11 am ET.

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