Larger miners with a low cost of production and low debt are likely to be the big beneficiaries of increased capacity, the report said.

Bitcoin (BTC) miners are adding significant capacity, with the 16 largest publicly listed mining companies accounting for 16% of total BTC mined, broker Bernstein said in a research report Thursday.

Bernstein says their combined mining capacity is currently 72 exahashes per second (EH/s), and notes the firms are planning to increase that by 182% in the next 2-3 years.

“However, the larger miners with low cost of production and low debt are likely to be the big beneficiaries of capacity addition, with greater capacity to withstand any bitcoin price volatility and cost spike from upcoming bitcoin halving in Q1 2024,” analysts led by Gautam Chhugani wrote.

The bitcoin price is currently in the vicinity of $30,000, and 15 of the companies have production costs below $15,000 per BTC, the report said.

“With the upcoming halving, that would double the cost of production, and would push a few miners to break-even, assuming no price increase from here,” the analysts wrote.

Still, if the market sees positive momentum from bitcoin exchange-traded-fund (ETF) approvals and increased institutional participation, that would give miners enough “margin room” for the 2024 halving, the note said, adding that the “lower the cost of production, better the miner positioning for the bitcoin halving impact.”

The broker notes that three of the miners have a debt-to-equity ratio of more than 1, which reduces their ability to withstand depressed bitcoin prices.

Four – Riot (RIOT), Marathon Digital (MARA), Hut 8 (HUT) and Hive Digital (HIVE) – hold bitcoin on their balance sheet. This allows these firms to wait for higher prices before selling, and make greater realized gains on the crypto they have mined, the note added.

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The company also reiterated its expectation to have 23 EH/s of mining capacity around the middle of 2023.

Marathon Digital (MARA) fully paid off $30 million in revolver loans during December, freeing up 3,615 bitcoin (BTC) that had been pledged as collateral, according to its monthly update.

The lender on the revolver was Silvergate Bank (SI), which this morning announced deposit withdrawals during Q4 of $8.1 billion as it continues to reel from the FTX collapse fallout. Silvergate shares are lower by 46% today.

The Marathon move is the latest in a series of similar actions from bitcoin miners to reduce their debt obligations through payments or restructurings as the bear market continues to take a toll on the industry.

Marathon’s unrestricted bitcoin holdings are now 7,815 (about $130 million), and total bitcoin holdings – after production of 475 bitcoin in December – are up to 12,232. Unrestricted bitcoin holdings on Nov. 9 (prior to the FTX collapse) had been just 1,950. Marathon has repeatedly hinted at its intentions to sell some of its mined bitcoin, but hasn’t yet done so.

Marathon stock was down 4.1% for the session at press time.
The company as of Jan. 1 had an operating mining fleet of 69,000 rigs with hashrate, or computing power, of 7 exahash/second (EH/s). Marathon continues to expect to have installed computing power of 23 EH/s sometime around the middle of 2023.

Turning back to Silvergate, the crypto lender had ties to crypto exchange FTX, which filed for Chapter 11 bankruptcy on Nov. 11. To counter the deposit outflows in Q4, the bank this morning announced it sold off $5.2 billion of debt securities, resulting in a $718 million loss.

Silvergate had previously lent funds to Marathon through two different debt instruments. One is the revolving credit facility, which Marathon reduced from $30 million Nov. 30 to zero by year-end, that was initially signed in October 2021. The other is a term loan agreed to in August 2022. Marathon did not respond to CoinDesk’s request for comment as to how much of the term loan was outstanding at the end of 2022.

Marathon’s Vice President of Corporate Communications, Charlie Schumacher told CoinDesk in November the company had drawn about $100 million roughly equally from both debt instruments, meaning $50 million could still be outstanding with Silvergate.

Marathon’s plan initially, said Schumacher, had been to draw on the term loan to pay down the credit line, but the FTX collapse and resulting market uncertainty forced a rethink, with the company instead deciding it a better idea to deleverage its balance sheet.

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Jack Dorsey’s Block and Bitcoin venture capital firm Stillmark co-led the funding round.

Gridless, a bitcoin mining company that helps generate new sources of energy in East African rural communities, has secured a $2 million seed investment round led by Stillmark and Jack Dorsey co-founded payments firm Block, the company announced Tuesday.

The investment will support the company’s expansion of bitcoin mines across African markets. In its first year, Gridless has contracted five project pilots in rural Kenya with African hydroelectric energy company HydroBox, three of which are operational. The company plans to expand to other East African regions in the near future.

Gridless designs, builds and operates bitcoin mining sites alongside small-scale renewable energy producers in rural Africa where excess energy is unused. Gridless serves as the anchor tenant, financing the construction and managing the operation of data centers in these rural communities where traditional industrial or commercial customers are unavailable.

Gridless brings “a socially and environmentally conscious approach to bitcoin mining, one that provides tangible benefits by way of access to electricity for communities in rural parts of East Africa,” says Alyse Killeen, Managing Partner at Stillmark, a venture capital firm.

Thomas Templeton, Bitcoin Mining and Wallet Lead at Block, added: “Gridless represents a close strategic alignment with our vision of ensuring the bitcoin network increasingly leverages clean energy, in combination with bitcoin computational centers around the world.”

The funding comes as Africa experiences a grassroots crypto movement, propelling the world’s highest proportion of retail payments of less than $1,000 and leading to far more peer-to-peer transactions proportionally than all other regions globally. Bitcoin miners have been struggling to survive amid this year’s grueling market conditions, which have seen bitcoin prices fall and energy costs surge, reducing profit margins.

However, in recent months, mining companies that have access to low cost energy and more innovative business models have succeeded in raising capital.

Most recently, a new solar-powered bitcoin miner, Aspen Creek Digital Corp. (ACDC), raised $8 million in Series A funding and Vespene Energy, a company that converts methane gas released from landfills into power for bitcoin mining, closed a $4.3 million funding round.

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The miner has the right but no obligation to sell the shares to investment bank B Riley.

The largest bitcoin miner by hashrate, Core Scientific (CORZ), has signed an agreement with investment bank B Riley to issue up to $100 million of shares to the bank over two years to enhance liquidity.

Core Scientific has the right but no obligation to issue these new shares, subject to some limitations and conditions, according to a statement. The company plans to use this additional funding to bolster its balance sheet and help the miner expand, Core CEO Mike Levitt said in the statement.

The deal comes as a crypto bear market hammers shares of the publicly traded miners. Stocks of some of these publicly traded miners, including Core, have fallen anywhere between 50% to 80% this year.

The miner has also issued B. Riley 573,381 shares of common stock as consideration for B Riley’s commitment to purchase Core Scientific shares.

Core has been raising cash by selling some of the bitcoins it has been mining. Last month, it sold 7,202 bitcoins at an average price of $23,000 to raise about $167 million. The miner said it intends to use the proceeds from the sales mainly for payments toward ASIC servers, capital investments in additional data-center capacity and debt repayments.

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Current CFO Jeff McGonegal will retire and move into a new role as senior advisor of the miner in mid-August.

One of the largest publicly traded bitcoin miners, Riot Blockchain, appointed Colin Yee, its current head of corporate and financial operations, as the new CFO, effective Aug. 15.

“We are pleased that Riot’s current operational momentum will continue unabated as Colin Yee steps in as our new CFO to help the company achieve and exceed its strategic goals,” Les said.

The change in CFO comes as the shares of the miner have fallen about 72% this year, inline with its peers Core Scientific and Marathon Digital. The bitcoin mining industry has been rocked by bitcoin’s declining price since last November.

On May 10, Riot reported its first quarter earnings where its revenue missed estimates but the miner maintained its hashrate guidance of 12.8 exahash per second (EH/s).

The current CFO Jeff McGonegal will retire from his position as CFO and move into a new role as senior advisor to Riot on the same day, according to a statement.

McGonegal is expected to remain employed by Riot through the terms of his employment agreement, ending Feb. 7 of next year, to ensure a smooth transition. After that he is expected to enter into a consulting agreement with the miner

“Jeff McGonegal is our longest-serving employee and has contributed greatly to the Company over the years,” said Jason Les, CEO of Riot. “We are pleased that he will remain a Senior Advisor to the Company to ensure a smooth and orderly transition, and continue to be a part of our team.”

Yee, who is a chartered professional accountant (CPA) joined Riot as head of corporate and financial operations in April 2022.

Prior to Riot, he was the COO and CFO of a family office with controlling interests in companies focused on construction and geothermal systems, according to the statement.

On March 23, Riot’s former chief operating officer, Megan Brooks-Anderson, exited her position after one year at the company.

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The company also sold 200 bitcoin during the month, raising $9.4 million.

Bitcoin miner Riot Blockchain (RIOT) produced 511 bitcoin during March, up 176% from 185 mined a year earlier. As of month’s end, the company held 6,062 bitcoin on its balance sheet.

In a somewhat unusual move, Riot also sold 200 bitcoin during March at an average price of $47,090 each, or a total of roughly $9.4 million. The company earlier this week filed a shelf offering for the sale of up to $500 million in stock via an “at-the-market” program.

Riot received another 1,080 Bitmain S19j Pros during March, deployed 4,440 S19j Pros, and has another 5,030 units ready for deployment. There are also another 5,430 units that Bitmain has shipped, and Riot expects to receive during April.

Once all of the above have been put to work, Riot will have a total of 53,379 miners working, with a hash rate of about 5.4 EH/s. By January of next year, the company expects to have a hash rate capacity of 12.9 EH/s, which assumes full deployment of about 120,150 Antminer ASICs.

The stock price is up marginally in after hours action, but fell 7% during the regular session amid a broad selloff for the bitcoin mining sector that saw Marathon Digital drop 9.2%, Hive Blockchain down 5.2%, and Hut 8 lower by 5.8%.

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The miner is hodling all its bitcoins and currently has 9,373.6 bitcoins with a fair market value of approximately $427.7 million.

Marathon Digital (MARA), one of the largest publicly traded bitcoin miners, is still on track to meet its hashrate guidance of 23.3 exahash per second (EH/s) by early 2023, despite a 45-day delay in deploying its mining rigs during the first quarter, the company said in a statement Monday.

The company attributed the delay to a longer-than-expected permitting process for the required power for its operations.

“Typically, power flows from power stations into the grid. However, to ensure we have a consistent power supply when the renewable sources are operating intermittently, we also needed power to flow from the grid back into the power station at scale,” said Marathon CEO Fred Thiel, noting that this process required permitting, which delayed the deployment.

The delay comes after Marathon said that during the fourth quarter of last year maintenance to the power generating station in Hardin, Mont. affected the company’s bitcoin production in November.

However, Thiel said that the “delays are now behind us” and expects to reach 23.3 EH/s by early next year.

Marathon mined 1258.6 bitcoin during the first quarter, a 15% increase from the previous quarter and 556% higher than a year ago.

The miner is still holding on to its mined bitcoins and currently has 9,373.6 BTC with a fair market value of approximately $427.7 million.

Marathon also confirmed to CoinDesk that it is open to selling the company for the right offer as was earlier reported by Bloomberg.

Marathon shares have fallen 12% this year, while bitcoin has fallen 2.6% and mining peers Riot Blockchain (RIOT) and Core Scientific (CORZ) have dropped 9% and 16%, respectively.

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The company would rather focus on its highly successful bitcoin mining efforts.

Bitcoin miner CleanSpark (CLSK) is considering strategic alternatives for its legacy energy business, aiming to focus solely on its bitcoin mining segment, the company said in a statement accompanying its quarterly earnings for the three months ended Dec. 31.

“Focusing our efforts on our bitcoin mining segment allows the Company to capitalize on the tremendous opportunity bitcoin presents,” said Zach Bradford, CleanSpark’s CEO, in a statement.

According to CleanSpark’s 2021 annual report, its energy hardware, software and services segment contributed about $9 million, or 18% of its annual revenue of $49.4 million.

CleanSpark also reported that its first quarter revenue increased to $41.2 million, about 52% higher than the $27.1 million in the previous quarter.

The company currently has 20,900 machines in operation with a total hashrate exceeding 2.1 Exahash/second and producing approximately 10 bitcoin per day.

The miner’s stock was up about 8% in after hours trading following the release of its report

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