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Marathon Digital CEO: We're Bullish on Bitcoin

November 4, 2022

Marathon Digital Holdings achieved a remarkable milestone by mining 615 Bitcoins in October 2022, primarily driven by an 84% increase in the company's hash rate and the successful transition from their Hardin facility to King Mountain. This transition involved adding 69,000 miners, contributing to their record-breaking performance. With the aim of reaching a 23x hash rate by mid-2023, Marathon Digital strategically deploys energy-efficient miners, specifically the Bitmain S19 XPs, providing a distinct cost advantage. Their asset-light approach, which involves partnering with site operators, has helped them minimize capital expenditures and maintain competitive operating costs. Despite challenges in the mining industry due to market fluctuations and energy costs, Marathon Digital remains well-prepared, supported by a robust balance sheet, efficient operations, and substantial Bitcoin holdings. Fred Thiel, the CEO, expresses confidence in Bitcoin's future demand rebound once prevailing macroeconomic challenges ease.

00:00 Mining Surge: Marathon Digital mined 615 Bitcoins in October.

00:40 Facility Transition: Shift from Hardin facility to King Mountain bolstered output.

01:49 Asset Light Strategy: Reduced capex by partnering with infrastructure operators.

02:20 Efficient Miners: Deployment of energy-efficient Bitmain S19 XP miners.

03:23 Bankruptcy Ties: $81 million exposure to bankrupt Compute North.

05:05 New Facilities: Upcoming operations in North Dakota and Texas, emphasizing renewable energy.

06:13 Industry Challenges: Potential for more bankruptcies amid bear market and high energy costs.

Transcripts are autogenerated. May contain typos.


crypto minor Marathon digital mining a record 615 Bitcoins in October Marathon further increased its hash rate by 84 in October in setting its new monthly High and joining us to discuss just that is Fred Thiel he's a CEO of marathon digital Holdings Fred great to have you on the show so Marathon digital mind in October many Bitcoin and at almost 615 almost matches the 616 at mind for the entire third quarter how is it even possible well you know we had a big shortfall from the transition out of our Hardin


facility in Montana uh which we fully exited during the quarter and then we brought our wolf our sorry King Mountain facility fully online with 69 000 miners uh during the same period so there was this nice transition and uh you know as of November 1 we're performing uh around 7x a hash and we're continuing to deploy miners you know as we've said in our previous um releases we still expect to be at 23x Ash mid-2023 uh and we continue to deploy miners both in Texas and then later this year starting in North Dakota together with


our partner applied blockchain and uh very excited about the progress we're making obviously uh I think we're most excited about so the miners we're deploying now are all fit main s19 XPS which are the most energy efficient miners out there which are 30 percent more energy efficient than the s19j pros that most people have deployed so in times of high energy prices and low Bitcoin it gives us a very core strategic Advantage uh relative to our cost of my Bitcoin so how are conditions for minors now with Rising energy costs


and depressed Bitcoin prices and how are you able to Buck the trend well yeah I think part of it is our model this asset light model we've been talking about now for a little over a year and a half where essentially we don't invest in the capex and the heavy capex costs of the infrastructure but rather we partner with operators uh who build out the sites they bear the burden of the capex and we provide Miners and mine and due to our scale we're able to negotiate very attractive prices for ourselves but what that does is it means


that all our capex really is just focused on buying and deploying Miners And so unlike some of the other miners out there who are either vertically integrated developing their own sites they have very large upfront capex expenses relative to site development that we don't have at the same time we're a very lean operator with amongst some of the lowest uh you know cost to mine Bitcoin in the industry and that's really just based on our model so we are very focused on being agile uh and evaluating opportunities in the


marketplace uh as they arise we were very successful in 2020 and 2021 and raising sufficient Capital to be well positioned uh for this Marketplace we have very little debt very little current debt on our balance sheet at all and uh we think we're very well positioned to weather the balance of this winter and be extremely well positioned as things come back um in due course because we'll have this very large Fleet of Highly energy efficient miners and we think we'll be able to be definitely you know one of


the leading and most dominant players in the industry and yet Marathon digital is exposed by 81 million dollars to compute North which was a hosting partner of yours going through bankruptcy right now so what happens to those funds now so you need to look at kind of what the makeup of that 81 million is so um a large portion of it 50 million are actually deposits that are prepayments for energy and um other things predominantly tied to the King Mountain site which was not it which is not part of the bankruptcy so that site is fully


out of bankruptcy um and um though that asset is being sold the compute North portion of it is being sold um as part of the bankruptcy process um but that site was not part of the bankruptcy so 50 million of the 81 million were deposits related to energy payments and hosting and then there was 10 million dollars of preferred equity and roughly uh 21 million dollars of uh a loan that was made to compute North so if you think about the kind of uh exposure or immediate exposure right now obviously the equity investment that we made uh


last year um will likely be washed out uh and then uh you know the loan we still have to see but the deposits we feel are still good are you hopeful that you'll get those funds back through the bankruptcy process well yeah the deposits essentially you eat down as you consume power right so they're that's kind of the way that model Works uh so um we continue to you know work with compute North and uh the other owner of the King Mountain site as it goes through this process and you know so far we think things are going in the right


direction are you surprised by the compensation and bonuses handed out to Executives right before declaring bankruptcy do you think that's appropriate given they owe creditors like you money I'm not going to comment on that all right um You also mentioned you have some new facilities under construction What's the progress on that so things are going well uh applied blockchain is uh building a new site in North Dakota which is behind the meter at a wind farm similar to our other facilities um you know that we're now operating all


focused on being behind the meter renewable energy sites and uh the applied blockchain site they've laid Foundations at this point for the buildings and so the building process will start on those locations and so the South the North Dakota sites will come online uh early next year and there's a Texas facility which we're currently in the process of deploying miners to which will start coming online um before the end of this year Fred is there any further concern that there may be more bankruptcy in the mining


industry given the bear Market the high energy costs or do you think that has bottomed out so I I think um there is likely more to come um you know obviously you know core scientific was a big one and that story is not done yet I believe that you know Mike Levitt's a good operator he knows what he's doing relative to financial markets you know so to deal with lenders and restructured debt so I'm sure they'll find a way to um do the best he can in this process uh you know Argo it's another story they


need Capital to complete their uh their site and get their PPA that's a bigger problem I think um and then as you look down kind of the list there are uh you know a number of other operators who either don't have the capital to fully deploy uh the sites that they built or don't have the capital to finish the sites they've built and so you're going to see people who are in a position where they're either going to sell the miners they have on order or potentially sell miners to raise cash to be able to finish


building out their sites but the winter time is the worst time to be trying to sell Assets in this space so I I think we will likely see a number of other companies uh have issues here um and uh you know we'll just have to write it out but at the end of the day similar to in Prior Winters in this industry you know the players with the strongest balance sheets Will Survive come out the other end and Thrive provide further pressure selling pressure on bitcoin going forward no you know I I think if you think about


Minor Supply which is kind of what you're alluding to um you know a lot of minors have sold other Bitcoin I think we're one of the only miners other than maybe HUD eight who hasn't sold Bitcoin uh at this point so we have over 11 000 BTC on our balance sheet now um making us most probably third or fourth largest holder of Bitcoin to publicly traded companies in the U.


S um we don't have a current need to sell Bitcoin so as we've previously said you know we'll continue to huddle until we feel that it makes sense for us to sell some Bitcoin to cover our operating expenses but uh we're very bullish on bitcoin we continue to be bullish on bitcoin and we think that we're getting to the end of the macro events that have been really putting pressure on bitcoin um it's not a supply issue that's putting pressure on bitcoin it's a demand lack of demand and I think that


demand will begin picking up again once uh we're through kind of some of these macro events that uh we have facing us over the next six months