Mining companies are raising a wave of financing, and Marathon Digital is aiming its bullets at BTC

Author: Climber, Golden Finance

Since the BTCHalving, mining companies have been under increasing revenue pressure. Not only have small mining companies been forced to shut down, but even large mining companies have injected a large amount of funds. Data shows that listed mining companies have raised a total of $2.2 billion to cope with cash flow tightening after the Halving.

In addition to increasing the issuance of stocks in the stock market, these leading mining companies also use equity financing, convertible bonds, and loans to alleviate debt problems caused by tight liquidity.01928374656574839201

However, financing can only solve the immediate needs. Listed mining companies still need to explore new economic paths, including increasing Mining Rig to improve Computing Power, acquisition to expand Mining Farm, and turning to the AI field. It is worth noting that some mining companies have started to invest in Bitcoin, such as Marathon Digital’s recent acquisition of over 4,000 BTC. This indicates that investing in BTC has become one of the business choices for large mining companies, trying to follow in the footsteps of MicroStrategy.

Listed mining companies with consecutive financing

On August 1st, Galaxy released its mid-year report on BTC mining for 2024. The data shows that in Q1, listed mining companies raised $1.8 billion in financing, setting a record for the highest quarterly financing amount in the past three years. And out of the $1.8 billion raised, 75% came from the top three miners in terms of Market Cap: Marathon, CleanSpark, and Riot.

In addition, since the beginning of the year, there have been a large number of mergers and acquisitions among BTC mining enterprises, with a total transaction volume exceeding 4.6 billion US dollars, and the transaction types are divided into site sales, Reverse mergers, and company acquisition.

According to TheMinerMag data, 9 out of 13 mining companies listed in the US in Q2 2024, including Bitdeer, Bitfarms, Cipher, CleanSpark, Core, HIVE, Marathon, Riot, and Terawulf, raised a total of $1.25 billion through various stock issuances. In addition, Iris Energy raised $458 million in the second quarter, bringing the total amount of funds raised by miners to over $1.7 billion.

And the third quarter has raised another 5.3 billion U.S. dollars, bringing the total financing amount to over 22 billion U.S. dollars.

From the above figure, it can be seen that the mining companies raised more than 1.5 billion US dollars in funding in the Q1 and Q2 quarters of 2024. Although the data for the second quarter is slightly lower than the first quarter, it is worth noting that convertible notes and asset-backed loans have increased since the second quarter.

Since the beginning of this year, the financing amount of listed mining companies has risen significantly, which can greatly indicate the urgent need of these companies for cash flow. Especially with the arrival of the BTCHalving cycle, Mining revenue has decreased significantly, and the survival environment of mining companies is becoming increasingly unfavorable. Such negative Unfavourable Information is also frequently reported.

In August of this year, BTC mining company Core Scientific announced its financial performance for the second quarter of the fiscal year 2024, with a net loss of 804.9 million USD, compared to a net loss of 9.3 million USD for the same period in 2023.

Cipher Mining, a mining company, reported a net loss of $15 million in Q2, slightly higher than the net loss of $13.2 million in the same period last year. Just last month, the company had plans to sell after receiving an acquisition offer.

Even the top mining company Marathon’s second-quarter revenue was lower than expected, at $145.1 million, with its second-quarter adjusted EBITDA turning from last year’s $35.8 million to a loss of $85.1 million.

In July, the CEO of Swan, a BTC-dedicated investment platform based in California, announced that the company is withdrawing its mining business, downsizing, and canceling its listing plans. Swan’s custodial mining division was established in July 2023, with plans to go public at the end of this year.

Decreased Revenue, Expanding New Paths

The biggest reason for the decrease in the revenue of listed mining enterprises comes from BTCHalving, which does not need to be elaborated too much. Behind the fact that mining enterprises are willing to issue more shares to raise funds, there are other factors such as the historical high of Mining Difficulty and increased electricity costs.

According to the statistics chart of Bitcoin Magazine, the BTCMining difficulty has reached a historical high. As of the writing of this article, the BTCMining difficulty is 86.87 T, and the average Computing Power of the entire network in the past seven days is 633.73 EH/s. In contrast, the BTCMiner income has also hit a yearly low as the Mining difficulty reached its peak, with only 2.54 million dollars on August 11th.

In this regard, analysts at JPMorgan also pointed out that the profitability of BTC mining in August fell to its lowest level in history.

On the other hand, the electricity cost of mining enterprises is also increasing. BTCHalving and the rise in mining difficulty have forced mining enterprises to improve the performance of mining rigs, expand the number of mining rigs, and expand the scope of mining farms to maintain income, which will inevitably lead to an increase in electricity consumption.

Due to the shortage of electricity resources and the impact of environmental factors, government departments are also trying to increase electricity prices to put pressure on mining enterprises. For example, senior officials of the International Monetary Fund recently proposed an 85% increase in electricity prices for Crypto Mining, and the National Electricity Administration of Paraguay increased the electricity fees for Crypto Mining operators by 14%.

The sharp decline in revenue and the pressure on operating costs have also led mining companies to continuously try new paths for enterprise development, such as the above-mentioned efforts to increase production. Recent cases include the plan of Bit Little Deer to issue $150 million convertible bonds for data center expansion, and Cleanspark’s $167.7 million acquisition of 26,000 immersion Mining Rigs in Bit Mainland.

In addition, there is also an acquisition phenomenon happening among mining companies. For example, Riot Platforms intends to acquire Block Mining for $92.5 million, CoreWeave intends to fully acquire Core Scientific, Bitfarms is in negotiations to acquire Stronghold Digital Mining for approximately $164 million, and so on.

In addition to improving their Mining business, mining companies are also trying to shift towards the AI field. Examples include Core Scientific signing a long-term contract with CoreWeave, Hut8 announcing the commercialization of their AI business, and Bit Deer planning to acquire Desiweminer, an ASIC chip design company, in a $140 million all-stock transaction.

Layout transformation AI is effective for mining companies, and their stock prices have rebounded to varying degrees. However, in the long run, it still needs to be tested by the market. Obviously, the above paths require a large amount of capital to be realized, which also explains why mining companies have been continuously financing.

Unlike in the past, mining companies are beginning to use raised funds for investing in BTC.

On August 12, Marathon Digital Holdings announced plans to private sale issuance $250 million convertible preferred notes, and the company intends to use the net proceeds from the sale of the notes to purchase additional BTC. Shortly thereafter, it was reported that the company purchased 4144 BTC within two days.

In July, Marathon Digital increased its holdings of 2282 BTC and did not sell any BTC in June.

Marathon Digital’s large purchases of BTC are closely related to its performance, but its revenue in the second quarter fell short of expectations. In addition, the company has made several efforts this year, such as Marathon Digital’s $87.3 million acquisition of Applied Digital’s BTC mining data center, cooperation with NiceHash to launch custom firmware for BTC ASIC Mining Rigs optimized for the NiceHash Mining platform, and the release of mining products such as the MARAFW firmware and the MARA UCB 2100 control board. However, these measures have only served to pump the company’s stock price.

Another mining company, CleanSpark, mined 494 BTC in July, but only sold 2.54, with a reserve of 7082 BTC.

And CryptoQuant’s research report also pointed out that the BTChash indicator also indicates that the Minerdumping period has ended.

The above phenomenon indicates that listed mining companies raise funds through issuance convertible bonds and stocks to expand market share and enhance Hash Rate, but ultimately they are still looking for ways to maximize profits. Retaining BTC and investing in BTC are becoming the business choices of mining companies.

Conclusion

The decrease in income has forced mining companies to seek diversified sources of income to maintain competitiveness, with conventional methods including improving existing business capabilities and levels, forming acquisition alliances, and adjusting industrial directions. But Marathon Digital has boldly made a different choice from other mining companies, that is, to purchase BTC on a large scale.

In fact, the success model of MicroStrategy is right in front of us. The profits brought by the increased investment in BTC by mining companies may not be lower than other businesses, and continuing to dump BTC obviously cannot help mining companies get rid of their current predicament.