Marathon CEO explains the 3 key factors that make or break a bitcoin mining company

Episode 50 of Season 4 of The Scoop was recorded remotely with The Block’s Frank Chaparro and Fred Thiel, Chair and CEO at Marathon Digital.

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Marathon Digital produced a “record” 1,259 bitcoins during the first three months of 2022. Yet the US-based bitcoin mining firm reported a Q1 net loss of $13 million, largely due to the decline in bitcoin’s price since last year’s highs.

Despite falling short on revenue estimates, Marathon CEO Fred Thiel claims that the current cost for his company to produce one bitcoin via mining is “about $6,250,” giving the firm plenty of margin before they would need to consider scaling down their operation.

In this episode of The Scoop, Fred Thiel sits down with host Frank Chaparro to discuss the intricacies of effectively managing a bitcoin mining company, along with Marathon’s growth over the years.

As Thiel explains during the interview, there are three main considerations when it comes to operating a bitcoin mining company:

“There are really three things we worry about: the price of Bitcoin, the cost of power, and our ability to deploy and then access hardware. Capital is important, too, but those are the three KPIs we look at all day long.”

While the price of bitcoin will always be prone to fluctuation, the energy cost for bitcoin miners is typically predictable since it is purchased on long-term contracts. As Thiel explains:

“Just like the airline industry will hedge their fuel purchases by buying futures on fuel, when we write a hosting agreement, we are locking in a fixed price for five years. So our cost of hosting, which is energy hosting, services, etc., is locked in a little over $0.04 a kilowatt hour for five years. And our energy provider has to take out the hedges to make sure that they're not upside down on the energy cost.”

The third consideration — the ability to deploy and access hardware — is often a bottleneck for Marathon, because the company has to wait on government bodies to approve operational permits.

During this episode, Chaparro and Thiel also discuss:

  • Renewable energy and mining operations
  • Weather's impact on bitcoin mining
  • NY State's new mining regulation

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