Marathon Digital (MARA) canceled its lines of credit with Silvergate Bank. The mining company reduced debt by $50 million and released $75 million worth of BTC as collateral. Silvergate Bank has started the voluntary liquidation process.
Marathon Digital, a leading Bitcoin miner, has ended its relationship with Silvergate Bank. This development came at a time when Silvergate Capital Corporation (Silvergate’s parent company) decided to shut down banking operations.
According to the official blog, the mining company completed the full payment of the loan and ended its credit lines with Silvergate. Given the adverse market conditions, this development came as the pro-crypto bank ceased operations.
The payment reduced debt exposure by $50 million and increased the company’s unrestricted Bitcoin holdings by 3,132 BTC, held as collateral. Hugh Gallagher, CFO of Marathon, stated the following:
“We have reduced our leverage by approximately $50 million, immediately released approximately $75 million worth of BTC that was held as collateral for the term loan, and reduced our annual cash interest costs and setup fees by approximately $5 million.”
Via Twitter, Marathon Digital Holdings posted the following:
“Marathon Digital Holdings has repaid its term loan and terminated its credit facilities with Silvergate Bank, reducing Marathon’s debt by $50 million and increasing the Company’s unrestricted bitcoin holdings by 3,132 BTC.”
Measures That Will Help Marathon Digital
In fact, reducing debt obligations will help the company and the mining industry as a whole. Marathon Digital is a company that specializes in Bitcoin mining.
As a mining company, their business model involves using high-powered computers to solve complex math problems to validate Bitcoin transactions and earn rewards in the form of a new BTC.
The company requires a significant capital investment in expensive computer equipment, electricity, and other operating costs to run this business. The company took on debt to finance these investments, which could be a source of financial stress.
Nonetheless, the mining giant proactively restored its balance sheet by paying off some of its debts and releasing its restricted BTC.
Marathon Digital settled $30 million in revolving loans with Silvergate in December, freeing up 3,615 BTC held as collateral. Such examples will help struggling miners release additional liabilities that could restrict further growth.
Silvergate Ceases Operations
The timing of this development to reduce exposure was interesting. The pro-crypto bank took steps to “cease operations.”
The announcement was “in light of recent industry and regulatory developments,” BeInCrypto reported on March 8. Silvergate Bank’s liquidation plan included the “full refund of all deposits.”
The sale comes just one day after a report hinted at a possible revival surfaced. The bank was discussing ways to avoid a shutdown with US federal regulators.
Needless to say, the decision has caused immense short-selling activity against its share price ($SI).
Numerous clients severed their alliances with the bank. The closure of Silvergate Bank may leave a ripple effect in the cryptocurrency industry, paving the way for existing and new entrants to fill the void.
By Audy Castaneda
