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Bitcoin miners plagued by price drops but focus on technology

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One of the largest publicly traded cryptocurrency mining companies in the US has shown how well it fared during the turbulent months of April through June. It was hardly good.

why it matters: Mining companies are seen as the last line of defense and are often the last to be sold. Because their business model can withstand volatile fluctuations in the digital assets they mine with powerful computer equipment. But they’ve been showing signs of stress lately.

News promotion: Marathon Digital Holdings yesterday said its second quarter loss widened to $191.6 million. This is largely due to his $127.6 million loss in bitcoin holdings as the price fell 56% during the period.

  • However, it increased its Bitcoin holdings to 10,127 BTC and produced 707 this quarter. That’s an 8% increase for him from the same period last year, but a 44% decrease from the previous three months.

detail: It was struggling with operational challenges related to rising energy costs, maintenance issues and weather impacting production.

  • A rig at the Marathon’s Hardin facility in Montana had maintenance issues and was taken offline due to a storm.
  • The company also experienced delays via its Texas host, Compute North.

in numbers: Marathon’s second-quarter revenues of $24.9 million were down approximately 15% from $29.3 million in the year-ago quarter.

  • Revenue costs (energy, hosting and other expenses) increased to $16.7 million from $4.1 million a year ago.
  • The company also recorded charges totaling $207.3 million related to investment fund holdings and digital currency impairments.

Big picture: But perhaps the worst is in the rear-view mirror. The mining giant continues on its ambitious path of increasing hashrate to 23.3 per second to his exahash. That’s more than 5x his processing power of about 4 ekhash (the miner’s hash rate) at the end of April (a measure of efficiency).

  • Marathon Chairman and CEO Fred Thiel said on the company’s conference call that the company’s business prospects are improving.

what others are saying: Generally speaking, the economics of mining have improved recently, DA Davidson analyst Chris Brendler told Axios.

  • “Bitcoin prices are going up and network hashrate growth has slowed down a bit,” Blendler said, suggesting that publicly traded companies the size of Marathon still have financial flexibility. I added that I can see it.
  • “The capital markets are not completely closed to these people,” he says.

what they say“Given the foundations we laid this quarter and the progress we have made since then, we are optimistic that Marathon’s operational and financial position is improving,” Thiel said in a statement.

  • He highlighted new, more powerful equipment coming online to help achieve expansion plans.

between lines: BTIG analyst Greg Lewis said during an earnings call focused on the company’s exit from the Hardin facility, how much it would cost to move the rigs instead of selling them and replacing them with new equipment. I asked how much it would cost.

  • “The miners at Hardin, back in our filings, said the cost to acquire was somewhere in the low $20s per terrahash, so we could sell at a small loss or near breakeven. I could,” Thiel replied.
  • “If we move, it will cost us $1 million to $1.5 million to move them. You can move on, Thiel said.

what we see: Thiel has said many times that Marathon will hit its 23.3 exahash goal, but has pushed the timeline to mid-2023.

Conclusion: Marathon has been plagued with delays for some time. The company, as of May, still expected to hit its long-term target by early 2023, according to an investor presentation.

what’s next: Peer mining firm Core Scientific plans to report after the market close on Wednesday.