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Bitcoin Miner Marathon Announces Q4 2022 Results: A Year Of Challenges & Optimism

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Marathon, North America’s largest Bitcoin mining company, has announced its financial and operational results for Q4 2022. The company reported a net loss of $686.7 million, or $6.05 per share, compared to a net loss of $37.1 million, or $0.37 per share, in 2021. The company recorded an increase in mined Bitcoins from 3,197 BTC in 2021 to 4,144 BTC in 2022, a 30% increase.

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Source: Marathon

Marathon also achieved several operational milestones during the year, becoming more sustainably powered by shifting away from fossil-fuel generation and deploying behind the meter at a large wind farm in Texas.

However, the Bitcoin miner faced several challenges in 2022, including accelerated costs related to exiting Hardin and the Compute North bankruptcy and a significant decline in the price of Bitcoin, which reduced its margin and resulted in impairment charges for its Bitcoin holdings.

According to the press release, compared to the prior year, unfavorable variances included a fourth-quarter impairment charge of $332.9 million related to the carrying value of mining rigs and advances to vendors.

The carrying value of digital assets also declined, resulting in impairments and realized and unrealized losses totaling $317.6 million.

Impairments of $55.7 million related to the Compute North bankruptcy and previously disclosed legal reserves of $26.1 million were also included. Interest expense increased by $13.4 million.

However, partially offsetting these unfavorable variances were a significant reduction in general and administrative expenses of $117.6 million, gains on sales of mining rigs of $83.9 million, and a favorable income tax variance of $44.4 million.

Bitcoin Miner Marathon’s CEO Optimistic About Future

Despite these challenges, Marathon’s CEO, Fred Thiel, remains optimistic about the company’s future. He said that Marathon is in a stronger position today than it was a year ago, with a strong balance sheet and a roadmap to hitting its primary targets:

We have two primary goals for 2023: the first is to energize our previously purchased mining rigs to reach our target of 23 exahashes by the middle of this year, and the second is to optimize our performance – to become more effective and more efficient.

Thiel added that Marathon is pursuing alternative banking relationships in light of recent developments with Signature Bank and believes that these strategic actions have bolstered its financial position. It will continue providing the company with optionality, which is essential given the current environment.

Nevertheless, Marathon faced several challenges in 2022 that affected its financial performance, but the company remains optimistic about its future. It aims to become one of North America’s most sustainably operated Bitcoin miners and achieve its goals for 2023.

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Marathon Mines Record 687 Bitcoins, Boosts Production By 45%

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Marathon Digital Holdings, one of the largest Bitcoin miners in North America, announced its record production of 687 Bitcoins in January 2023. The company, which currently holds 11,418 BTC, also sold 1,500 of its holdings during the same month and intended to continue selling a portion of its Bitcoin this year.

Marathon’s Chairman and CEO, Fred Thiel, attributes the improvement in bitcoin production to the successful collaboration with their hosting provider in McCamey, Texas. The new partnership addressed technical issues that suppressed production in Q4 2022. The result is a 45% increase in bitcoin production from December 2022 to January 2023.

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Marathon Sells 1,500 Bitcoin To Strengthen Balance Sheet

However, per the press release, the company’s BTC production has seen a significant surge, with a production of 687 units in January, marking a 49% increase from the previous month’s 462 units. It has resulted in an average daily production of 22.1 units, also a 49% rise from January’s 14.9 units.

Additionally, the operational and energized hash rate (EH/s) has seen a 103% increase, reaching 7.3 in January 2023 compared to 3.6 in January 2022. The installed hash rate (EH/s) has also seen a 206% boost, now standing at 11.0 compared to 3.6 in January 2022.

With more consistent bitcoin production, Marathon decided to sell some of its holdings to cover operating expenses. The sales did not significantly impact the miner’s unrestricted Bitcoin holdings, which increased from 7,815 to 8,090 from December 2022 to January 2023. Marathon ended January 2023 with $133.8 million in available cash on hand.

According to the press release, with production increasing, Marathon aims to focus on energizing more miners and optimizing their performance. The company aims to become one of the largest and most energy-efficient Bitcoin mining operations globally by installing 23 exahashes of computing power by the middle of 2023.

Marathon’s facilities in Garden City, Texas, and Ellendale, North Dakota, are also expected to commence operations in Q1 2023. In January, 2,100 of Marathon’s S19 XPs were energized at the Jamestown facility, increasing the company’s operating fleet to approximately 71,000 BTC servers with a theoretical capacity of 7.3 EH/s as of February 1, 2023.

Recently, Marathon Digital Holdings and FS Innovation, LLC entered into a Shareholders’ Agreement to form an Abu Dhabi Global Markets company to establish and operate one or more mining facilities to expand bitcoin mining operations.

The company’s commitment to strengthening its balance sheet and improving operational efficiency, along with its partnerships and expansions, has placed it in a solid position to achieve its growth and operational targets in 2023.

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Bitcoin Mining Stocks Hit Hard By Crypto Winter: Tanked To 2% From 44% Peak

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The volatile climate of the cryptocurrency industry has had an adverse effect not only on the price of crypto but also on Bitcoin mining activity.

The Viridi Bitcoin Miners ETF (“RIGZ ETF”) reported on November 17th:

Trading volumes for bitcoin mining stocks are at historically low levels, indicating these stocks are oversold by exhausted market participants.

Bitcoin Mining stocks have been crashing ever since late November 2021, as reflected by its declining share of BTC trading volume, which hit its all-time high at 44% and is now just 2%. While over the same period, BTC’s daily trading volumes have risen rapidly because the price decreased. 

Btcoin Mining
Source: VIRIDI FUNDS

Based on the Viridi research, BTC’s daily trading volume is approximately $4 billion, which shows consistency. Individuals are selling it as a result of the cryptocurrency market’s unusual contagion effects and the more restrained macroeconomic situation.

As Per Jadran Mellerud, a Bitcoin mining analyst and consultant, the market is saturated and running out of sellers, as seen by mining stocks’ present modest trading volumes in comparison to BTC.

Bitcoin Mining Stocks Average Trading Volume

Trading volumes for the whole BTC mining industry are now quite low, and they are mostly focused on a small number of these stocks:

Since November 2021, Marathon has been responsible for 46% of the total trading volume, followed by Riot at 27% and Hut 8 at 7%. Together, these three companies have made up 80% of the sector’s trading volumes over the past year.

The research report indicates that since November 2021, Marathon has had an average daily trading volume of $215 million, indicating that the company has high liquidity and can support sizeable stock purchases without the price changing too much.

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Source: VIRIDI FUNDS

Whereas, the average daily trading volume for four stocks since November 2021 has been less than $1 million, which indicates that some bitcoin mining stocks are extremely illiquid. 

However, according to The Viridi Bitcoin Miners ETF, some of these stocks continue to generate sizable daily volume despite the sector’s overall weak trading activity.

These high-volume equities are the most likely to be bought by significant investors, while low-volume stocks may experience rapid growth if bitcoin prices soar once again.

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