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Bitcoin Miner Marathon Digital Ends Credit Ties With Struggling Silvergate Bank

2 mins
Updated by Dean
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In Brief

  • One of the largest bitcoin miners, Marathon Digital (MARA), said it terminated its credit facilities with Silvergate Bank and will wind down operations and liquidate its assets.
  • The miner reduced debt by $50 million and released $75 million worth of bitcoin held as collateral.
  • Crypto-friendly US-based Silvergate Bank has begun the voluntary process of liquidation, according to a statement issued by the California Department of Financial Protection and Innovation (DFPI).
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Marathon Digital, a leading Bitcoin miner, cuts ties with Silvergate Bank in the latest development aired on March 09. This development came at a time when Silvergate Capital Corporation (the parent company of Silvergate) decided to shut down banking operations.

Marathon Digital (MARA), one of the largest Bitcoin mining companies in the United States, is making headlines. Per the official blog, the mining firm completed the entire loan prepayment and ended its credit facilities with Silvergate.

Given the adverse market conditions, this development came when the crypto-friendly bank ended its operation. 

The prepayment reduced the debt exposure by $50 million and increased the company’s unrestricted bitcoin holdings by 3,132 BTC, held as collateral. 

“We have reduced our leverage by approximately $50 million, immediately freed up approximately $75 million in bitcoin that was being held as collateral for the term loan, and reduced our annual cash interest costs and facility fees by approximately $5 million,” said Hugh Gallagher, Marathon’s CFO in the statement.

Taking Steps to Help the Company

Reducing debt obligations will indeed help the firm and the mining industry as a whole. Marathon Digital is a mining company that specializes in Bitcoin mining. As a mining company, its business model involves using high-powered computers to solve complex mathematical problems to validate Bitcoin transactions and earn rewards in the form of new bitcoins.

The firm requires significant capital investment in expensive computer hardware, electricity, and other operational costs to operate this business. The company undertook debt to finance these investments, which could be a source of financial strain.

Nonetheless, the mining giant proactively restored its balance sheet by paying off some of its debts and freeing up its restricted Bitcoins. 

For instance, Marathon Digital cleared $30 million in revolver loans with Silvergate in December. Thereby setting free 3,615 BTC kept as collateral. Such examples will help struggling miners free up additional liabilities that could restrict further growth. 

Silvergate Calls Quits on Operations

The timing of this development to reduce exposure was interesting. The trending crypto-friendly bank took steps to  “wind down operations.” The announcement was “in light of recent industry and regulatory developments,” per the March 8 press release. The Silvergate Bank liquidation plan included “full repayment of all deposits.”

The liquidation comes just a day after a report surfaced hinting at a potential revival. The bank was discussing ways to avoid a shutdown with US federal regulators. Needless to say, the decision has caused immense shorting activity concerning its stock price ($SI). 

(SI) Silvergate Capital Corporation Price Performance
(SI) Silvergate Capital Corporation Price Performance Source: Trading View

Numerous famous clients cut contact with the said bank as covered by BeInCrypto. Silvergate Bank’s closure may leave rippling effects on the crypto industry and pave the way for existing and new entrants to fill the void. 

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Shubham Pandey
An engineer and an accountant by degree, Shubham ventured into the crypto world to pursue his passion. He believes digital currencies will redefine our economies in the decades to come, which drove his transition into this industry. Shubham has a multicultural background, having lived across India, Qatar, Oman and Australia. He is currently settled in Melbourne. As a News Writer, Shubham aims to actively analyze trends in the crypto world and break it down for everyday readers.
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