Marathon Digital Has canceled Its Legal Contract With Silvergate Bank

Marathon Digital, a Bitcoin mining firm, has terminated its credit facilities with Silvergate Bank as part of its long-term financial strategy to build liquidity. The move came just after Silvergate Bank’s parent company, Silvergate Capital Corporation, announced its voluntary liquidation and task winding down.

On March 8, Marathon announced that it had paid off its outstanding loan balance and had terminated its revolving line of credit with Silvergate Bank. The company also confirmed that the decision to cut financial ties with the bank was a significant part of its economic strategy.

Marathon can release the $68 million worth of Bitcoin it held as collateral for the loan with this move. This will eliminate $50 million of debt and reduce annual borrowing costs by $5 million.

Marathon’s chief financial officer, Hugh Gallagher, said that the cryptocurrency industry has significantly changed since the company opened its lending facilities with Silvergate last summer. 

He added that Marathon had built a more robust balance sheet with increased cash and available Bitcoin holdings. Gallagher stated that the company’s cash position led to the decision to prepay its term loan and eliminate credit facilities.

Marathon Digital Financial Strategy

Marathon’s financial strategy involves building a “war chest” of liquidity composed of cash and Bitcoin. The company has been paying down debt while increasing its cash positions. According to CoinGecko, Marathon trails only software analytics firm MicroStrategy as the second-largest publicly traded Bitcoin holder.

In October 2021, Marathon secured a $100 million revolving credit facility from Silvergate Bank. The funds will be used to buy Bitcoin mining equipment and support mining activities. However, with the recent changes in the cryptocurrency industry, Marathon decided to terminate its credit facilities with Silvergate Bank.

Marathon used a credit facility to buy 30,000 mining machines and upgrade infrastructure, as previously reported. Marathon’s earlier filing indicated that they funded the equipment and upgrades through the credit facility Marathon also reported a net loss of $147 million for 2021.

Marathon Digital ended its credit facilities with Silvergate Bank as a long-term liquidity building strategy. Furthermore, the move aligns with the company’s financial goals.

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Marathon’s action will unlock Bitcoin collateral, erase debt, and reduce borrowing expenses. Marathon focuses on building a robust balance sheet by increasing its cash and Bitcoin holdings.

The author’s views are for reference only and shall not constitute any investment advice. Please ensure you fully understand and assess the products and associated risks before purchasing.

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