Bitcoin mining giant Marathon is ‘shopping around’ for acquisitions ahead of halving

In a sign dealmaking action is heating up in crypto, Marathon Digital Holdings, a top US Bitcoin mining firm, is ramping up acquisitions of plants and companies.

In January, Marathon bought two Bitcoin mining plants in Texas and Nebraska in a $178 million deal.

With the Bitcoin halving event around the corner, Marathon is looking for more deals, Charlie Schumacher, the firm’s vice president of corporate communications, told DL News.

“If we have a bunch of money on our balance sheet, we have more opportunities,” Schumacher said.

Asked if the firm had any specific sites on its shopping list, he said: “There’s a couple of things we’re looking at.”

Ample war chest

Marathon has an ample war chest to tap for acquisitions. It holds $318 million in cash and nearly 16,000 Bitcoin, roughly $826 million today, totalling $1.1 billion on its balance sheet, according to its latest financial report.

When asked whether assets on the balance sheet would be used for acquisition purposes, Marathon did not immediately reply.

Marathon, which is listed on the Nasdaq, commands a $6 billion market capitalisation. It recently finished building a $406 million mining site in Abu Dhabi, and in November, it built another site near Paraguay’s Itaipu Dam to tap the country’s abundant hydropower.

Even as Marathon eyes expansion, it’s also dealing a controversy at its newly acquired plant in Granbury, Texas. Residents there say the never ending noise caused by its 80,000 fan-cooled computers is insufferable. Marathon has pledged to work with the town to solve the problem.

Deal action

Consolidation in the Bitcoin mining industry is increasing as the next Bitcoin halving is fast approaching.

CleanSpark, for example, announced this month it acquired two Bitcoin mining sites, with plans to buy a third, for $19.8 million.

Slated for April, Bitcoin will undergo its quadrennial automated halving event, slashing the rewards miners receive for maintaining the network.

‘We proactively went out and did this prior to the halving. We’ve been shopping around for sites to purchase.’

—  Charlie Schumacher, Marathon

Today, they earn 6.25 Bitcoin per block; this spring it will fall to 3.125.

This means mining outfits will have to execute the same amount of work for half the payout, squeezing the most inefficient miners.

“We proactively went out and did this prior to the halving,” said Schumacher, speaking to Marathon’s January acquisitions. “We’ve been shopping around for sites to purchase.”

These have historically been key consolidation moments, leaving weaker operations ripe for acquisition. Historically, Bitcoin’s hashrate — or how much energy is being used to maintain the network — dips as outdated machines go offline.

Galaxy Digital recently predicted that as much as 20% of the network hashrate would go offline following the halving event for this reason.

That hashrate inevitably comes roaring back, but this brief tightening can wreak havoc on smaller firms without the resources to stay afloat.

Marathon’s two new sites in Granbury, Texas, and Kearney, Nebraska, added another 390 megawatts of electricity — enough to light some 64,000 US homes — to power its mining fleet.

The additional megawatts added here mean Marathon can power even more machines to rake in even more Bitcoin.

Prime mining targets

The types of sites and deals are varied, Schumacher told DL News.

Some sites demand being built brick by brick from the ground up, while others already have a facility in place, and it’s merely a matter of adding a firm’s machines and restarting operations.

Building a site from scratch is more costly, but it means a firm can install its own computing machines.

“I’d be keeping an eye on data centre sites or brownfield sites that are over 20 megawatts in scale, that have older generation digital mining equipment,” Taras Kulyk, founder and CEO of SunnySide Digital, told DL News.

“I’d also be approaching teams that have been struggling operationally, as many smaller teams can’t optimise a site as well as a larger, better-equipped team can.”

‘In bull markets, if margins are really big, it doesn’t matter what you pay for energy. It’s about how fast you can grow.’

—  Charlie Schumacher, Marathon

Regardless of the deal, one thing is clear: Owning a facility outright means a mining firm can slash its overhead.

You’d no longer have to pay out a hosting fee to another operator, for example, said Schumacher. Hosting fees refer to costs like maintenance and housing machines in a facility.

Owning a site also means that a firm can better protect its cost of energy.

If a grid is under heavy use — which is often the case in a place like Texas with hot summers and cold winters — mining outfits can curtail their usage, selling power back to the market.

Energy hedging won’t matter, though, if Bitcoin kicks off another historic bull run post-halving. Following the halving in 2020, Bitcoin soared 600% over the next 12 months.

If Bitcoin goes on another post-halving run, Schumacher said expansion, rather than energy hedging, would be the wise strategy.

“In bull markets, if margins are really big, it doesn’t matter what you pay for energy,” he said. “It’s about how fast you can grow.”

Liam Kelly is DL News’ Berlin correspondent. Contact him at liam@dlnews.com.