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Marathon Digital: Launches Huge Fully Compliant U.S. Bitcoin Mining Operation | Power Hour

April 6, 2021

Marathon Digital Holdings, a NASDAQ-listed Bitcoin mining company, made waves in the cryptocurrency industry with its recent purchase of 103,000 S19 miners from Bitmain, signifying a significant boost in hashing power. This move positioned them as a major player in Bitcoin mining, accounting for nearly seven percent of the blockchain network's hashing power at the time. What set Marathon apart was their strategic partnership with a utility company, securing a remarkably low power rate of 2.8 cents per kilowatt. This cost-efficiency allowed them to produce Bitcoin profitably, with each coin costing around $3,500 to mine. Notably, Marathon launched its own mining pool in North America, focusing on producing OFAC-compliant Bitcoins—a unique offering that attracted institutional investors looking for regulation-compliant assets. With a substantial cash reserve and a significant Bitcoin holding, Marathon's strategy included holding onto these assets, making their stock a distinctive investment option for those seeking exposure to Bitcoin's value.

0:00 Intro

0:50 Company Overview

3:10 Revenue Growth

7:10 Expanding to Other Coins

11:40 Bitcoin Mining Pool

15:10 Energy Relationship

17:05 Timeline

Transcripts are autogenerated. May contain typos.


[Music] all right guys i'm joined by merrick okamoto ceo uh chairman marathon digital ticker m-a-r-a if you guys do not know this stock you have not been paying attention to the stock market but it has been one of the hottest stocks around america i've got to tell you uh we we do this show every single day and i don't think a day goes by without somebody in the chat asking us to take a look at marathon so so thank you so much for joining us today i know you're super busy so so we greatly appreciate it


hey it's my pleasure appreciate being invited thank you absolutely uh and and before we we dive into it if you could just give us an overview of the company and i know you guys put out a press release today uh that gave an update on on some of the the machines that you guys received uh bitcoin mining production uh but but if you could just do the quick overview on the company what the importance of the update today is that would be excellent certainly so um marathon is one of the uh original nasdaq listed companies that


is a pure uh bitcoin mining company um there's a lot of companies that are uh joining this industry now um they have a lot of catching up to do with marathon we purchased 103 000 uh s19 miners from bitmain i believe it's the largest order that they've ever had in terms of dollars and number of units uh when all those are installed after they've been delivered from bitmain we'll have over 10 extra hash of hashing power um that today where the network is today on the blockchain network would be


almost seven percent of the blockchain network so clearly one of the um largest bitcoin mining companies what we also did which was quite unique is we formed a partnership with a utility company and we placed all of our miners adjacent to their power facility so they leased us 40 acres we surrounded that with a fence and we built new substation transformer switches and we are placing all of our miners adjacent to that facility so that makes us uh you know we're not buying power from a utility company or from the grid um the rate on that


power was 2.8 cents per kilowatt which i believe is one of the lowest uh in the bitcoin binding industry in north america as well as china and that allows us to produce bitcoin that are trading today near 60 thousand dollars we make our coins for about 3 500 bucks we also announced a couple days ago that we're launching our own mining pool in north america which i believe that's of national security interest uh to secure the blockchain as well as the bitcoins that we mine will be virgin bitcoins and they will be ofac


compliant with the u.s treasury we don't know of anyone uh that has done that yet and we think that will create demand for our coins that we create from institutions uh who prefer to only buy coins that are following the rules and regulations of the us treasury awesome and mary i've got to say your investor deck on your investor relations website is is probably one one of my favorite that i've ever seen so if anybody out there if you haven't seen it just go on google search uh marathon digital investor


relations you'll find the investor deck and and one of the reasons why i like it is it starts right up front and it talks about basically uh revenue growth from 500 000 a month to to pretty much 100 million a month can you talk about what goes into that is it dependent on when the machines get delivered is it dependent on the energy deals can you just take us through i mean that's crazy explosive revenue growth sure so the details are helpful that's a great question and thank you um that is all derived from the decision um


after the having in may of 2020 um our board decided that we were going to become very aggressive and we remembered what happened in 2017 when bitcoin went from 100 to 19 000 the machine prices from bitmain uh exploded they went from five hundred dollars a machine to almost nine thousand dollars a machine we expected if bitcoin had a large rally that would happen again the miners would become very difficult to purchase and the prices would go up so we raised all the capital we could bought all the miners that bitmain would


sell us and now as those are deployed that's the reason for the increase in revenue as those machines are shipped every month from bitmain in their malaysia uh location we deploy those miners at our facility in hardin montana and every day we add miners and every day the number of bitcoin we produce is going up and it's just it's just great timing um we really hit it right at the perfect time to become aggressive and buy all those machines secondly um the low cost that we pay for our power lets us be we believe the low cost


provider in north america for creating bitcoin so it was really timing that's what's going to generate the revenue as the machines arrive we deploy them and we create more bitcoin every day excellent and the next question that i had was was to dive into competitive advantages right how you guys can compare to other miners i know that you've already covered part of that with you talked about the energy deal and also all the machines that you guys have ordered is there anything else on the competitive advantage side of things


that we should dig into sure um really i think just being public being a nasdaq listed company um allowed us to have access to raise capital um many other miners are either a they're private or b they were small bulletin board or micro cap companies and did not have access to the capital markets like we did um we we've been able to raise you know if we wanted to raise 500 million dollars today it would be no problem um so the interest in owning a nasdaq listed company that is a problem north that institutional money


and uh gives us the ability to raise capital should we need it right now we have 215 million 216 million in cash we also purchased from our treasury 150 million dollars in bitcoin when the last decline happened from 42 000 and went down to 28 000 we deployed 150 million bought 4 800 bitcoin those today um just three months later are worth almost 300 million dollars so that gives us about 515 million dollars of liquidity on our balance sheet and we have no debt and is the plan to sit on all that bitcoin uh or is it to slowly sell it off or


what does that look like we don't plan to sell it we do plan to hold it and give our investors essentially a nasdaq listed uh almost like an etf um we don't know the future if there came a time that we needed some capital for something that our board thought was strategic um and we and we needed that capital we could raise some capital from that or we could raise capital in the capital markets um but our plan right now is to hold all of our bitcoin uh that we own currently and all of the bitcoin that we


uh that we generate as virgin coins okay uh and you know right now it's it's bitcoin that you guys mine it's bitcoin that we're talking about uh thoughts on expanding to other coins like ethereum is one that i see thrown out a lot on twitter or or anything along those lines sure um we've seen a number of our competitors do that and frankly i get asked a lot if you know why we don't mind ethereum why we don't mind some of the other coins uh they certainly um do generate at these prices substantial


profits um but we made a decision to be just a pure bitcoin miner and because we did that more like an etf um if people want to buy bitcoin instead of opening an account on an exchange and going through the process of the anti-money laundering and know your customer rules to get that account open and then getting money in that account then not losing your key some people feel it's just better to own our stock and if you look at that presentation that you mentioned luke um you can see times and i'll just give


you a recent example in the last pullback in bitcoin our stock went from 50 down to 24 bitcoin in five days went up 38 our stock went up 80 so we we do have a lot of i believe institutional money and algorithmic uh trading institutions that like our stock because of that alpha and if you're looking for a way to be if you're a good stock picker and your timing's good um if you think bitcoin is bottom you can buy our stock and it's likely that the move that you get in bitcoin you'll get a bigger move


in our stock so we see a great deal of volume in our option activity uh the notional value if you take every option outstanding uh today times its current closing price the number you will come up with is astonishing it's close to a billion dollars in a notional option value so a deep deep book in our option trading as well as excellent liquidity in just the daily trading of our stock on the nasdaq okay and as an aside america i've got to say we do have a lot of chatters commenting about your master shirt


they're big fans so so very very timely to wear that one um you know and and i i guess get getting away from from the stock for just a minute here what is it like to go into some of those bitcoin mining rooms like like is is it noisy are they cold i've i've always wondered what it's like to go into some of these these major production facilities i've never seen one you know we've done um two styles of data centers uh the first one we did and i think many people did is when you were looking for power the


way to find it was to lease an old building 100 150 years old 100 000 square feet that used to manufacture uh something in the united states that now that manufacturing base moved offshore so you have these large empty buildings cheap power located nearby and we did that at first so we leased a building uh we put fans in it we brought in all the electrical and transformers and switches inside the building installed racks and we installed a few thousand miners and uh quite shocking to me uh i'll admit to you we turned them on


and the fans were so loud and the suction that they created was so strong the vacuum pressure that it looked like it was snowing in the room and what it was doing is it was peeling the paint off the ceiling and oh my god this little building and those were going in our miners so we figured there had to be a better way we've been at this a long time we've hired uh excellent people that do our hosting for us and so now we build our special purpose containers these containers allow us to control an environment


inside of a box that's literally the size of a shipping container now we only control the environment in the box instead of trying to control the environment in a giant uh old building so what does it sound like um when you walk in that room it's very very loud these machines scream at a super high rpm uh you have to wear headgear uh years um we try to keep these rooms at a pretty constant uh 50 to 60 degrees that's where the miners like to operate and that's done by using the fans and the ventilation system to move airflow


in and out to keep at those temperatures one of the reasons we chose harden montana if you just think about it it's pretty far north in the united states so it has a very cool climate and that's been excellent our miners love it we're generally i see a dashboard i can look at it right now and see how we're operating and we're at 99.


99 of our miners are running and it's because they love that environment that we've built okay great um and then can we talk about the pool a little bit uh so you guys put out a press release i i believe was maybe a week ago or a couple weeks ago uh talk to talking about the bitcoin mining pool can can you dig into that what advantage is that that presents for you etc we we believe that you know if you just look at the landscape of the mining pools most of them and this uh that miners are pointing to are all domiciled in china and if you


look at what a bitcoin mining operation does we validate transactions on the blockchain and many corporations now are moving their analog paper type systems and they're making them digital and moving them on a blockchain as they move those onto a blockchain they need validation for transactions to be proven and validated and we get paid to do that with our miners if you try to go it alone and just put all your miners on the network by yourself you could win some validations and there might be days that you did not


so everybody comes together generally in the binding operations and they pool together and choose a mining pool all the mining pools for the most part the largest say five are based in china and it's our belief there's two issues with that one is there's geopolitical risk having all of our machines pointed to china in in a situation where we can't control the internet there um what the government may do there we would like to onshore that and we've talked to many other large enterprise miners and they want to


do the same they want to point their miners to a pool in the united states the second issue and what i think is unique about our pool is if you look at the rules their ofac rules from the u.s treasury says you should not do business with these parties um these are known sex traffickers uh these are you know maybe hezbollah or terrorist organizations and we can see we take an api from the treasury that shows us the wallets who the end recipient is and says it's illegal for you in the u.


s to do business with these parties so we're u.s nasdaq listed company we want to follow the law so we're creating a pool that looks at the process of that we're going to mine a transaction and we look at the end result who the recipient wallet is if it's on the ofac restricted list we skip it so it doesn't mean that we're censoring uh that transaction someone else will mine it just we won't marathon will not mine uh something that the recipient wallet is on a list that the treasury says it's


illegal for us to do business with we believe that once we start creating these coins at the beginning of next month and we're going to put them in a separate uh holding a separate blockchain for them to be held in there will be institutions that want to buy that coin that is virgin ofac compliant to u.


s laws versus versus buying a regular bitcoin i think it'll trade at a premium um over time and there are institutions that just their bylaws won't allow them to invest in something and they're waiting to use some of their us treasury assets until something like this comes along and if you read or just google it numerous articles have been written in number of interviews in the last two or three weeks saying institutions that have not yet joined and purchased bitcoin that's the reason why they're waiting


for this clean ofac type coin to become available and we're going to provide it to them excellent uh and i'm getting a lot of questions in the chat talking about the the energy energy relationship um i i know you mentioned your it's not a utility that that you're partnering with but it seems like it's it's a company that actually produces energy could you circle back to that for just a second and clarify how exactly that relationship works and you know how that allows you to have as a competitive advantage cheaper


energy than competitors yes so um that facility can produce 100 megawatts of power um the company that owns that power plant is a private company called beowulf and what we did is we're the term for what we're called is we use all the power that facility will create that makes us what's called a base load user so the power the facility creates doesn't go through transmission lines and out to a utility network and share that power and then have to come back to us it comes from the power plant literally


into the new substation we built and the transformers we purchased and the power goes right into our specially built trailers to power our miners we've looked at many other facilities throughout the country and most of them you buy from a local utility that local utility then buys from the grid and that grid buys from a large consortium so there are a number of parties in your power pricing and you can't control uh some of those change their power rates every year and we developed a very long-term contract with beowulf


that locked in those energy prices and we don't have the risk of you know some of the things you saw in texas where they're buying from a grid and that grid went down and there was a interruption of power um we're buying directly from the power plant same ground where our machines are located so i think that gives us a real unique advantage over some of the other uh enterprise bitcoin miners awesome america i want to be respectful of your time i know we just have a couple more minutes here uh but can you talk to us about timeline


and what's next you know you know timeline either either for machine delivery you know what should we be paying attention to as investors out of the company etc um we we just published as you saw uh today and we included in that a timeline showing we're very transparent shows when all of our miners are supposed to be shipped um you can track that timeline we're going to publish that report every month around the first of each new month and tell you how many wins we installed in the previous month how


many coins we made what our current hash rate is and what we expect to be delivered in the next month um those things are out of our control there if there were logistics problems or shipping problems uh from malaysia to us um then we'll have to deal with that so far uh bitmain has honored every single thing that they said they would do they've not only done it they've delivered them early and i'll give an example the march shipment was supposed to be shipped by march 31 they shipped us half the units on march


15 and the balance of the units on march 21st so they've been a great partner for us uh they make a premium uh product the s19 pro and the s19j are amazing uh miners they produce the highest number of hash rate per uh the amount of electricity that's required to turn those machines on of any other machine so we see every day somebody puts out a press release hey i've got ten thousand machines well you have ten thousand machines producing forty tara hash or do you have ten thousand machines producing a hundred and ten tera hash


like the ones we bought so um we we really care about buying state-of-the-art equipment and i think what you'll see from us in the future as our cash flow continues to rise we will always be adding minors to our fleet and continuing to grow and try to maintain our dominant position as being the largest miner in north america awesome merrick thank you so much for taking the time and hopping on with us today again guys if you don't know the stock it's because you have not been paying attention to the market for long


because it has been one of the hot ones ticker m-a-r-a merrick thanks for hopping on the power hour sure appreciate it thanks for inviting us absolutely