MARA’s Bold Move: Lending Bitcoin and Bargaining with Risks

MARA just revealed they’re lending out 7,377 BTC, which is around 16% of their total stash. At current rates, that’s about $726 million worth of Bitcoin. Apparently, it’s all part of a strategy to make some yield and cover their rising costs.

In a recent chat, MARA’s Director of Investor Relations, Robert Samuels, assured us these loans are “short-term arrangements with well-established third parties.” But he played coy by not naming them, which doesn’t quite instill confidence.

When they put out their production update, MARA mentioned they mined 9,457 BTC in 2024 and went on a buying spree for 22,065 BTC at an average price of $87,205. It’s wild to think they blew nearly $2 billion on Bitcoin. So, as of today, they’re holding onto 44,893 BTC, valued at around $4.4 billion.

Drawn to the Yield, Risks Linger

MARA’s lending venture isn’t sending them on a yacht just yet, because the returns they’re pulling are just a “modest single-digit yield”, according to Samuels. They’ve been dabbling in Bitcoin loans for a while now, stating they want to generate enough yield to cover operational expenses.

I can’t help but wonder if they’re trying to harness some of the lightning: after all the drama surrounding the downfall of BlockFi, Genesis, and others back in 2022, the counterparty risks reek of danger. Still, it seems like they’re pretty sure of their partners.

Despite the risks, they made $3.9 million in interest income in Q3 2024, most coming from cash on hand and Bitcoin loans. And by mid-2024, they’d already pulled in $4.8 million in interest income, but with no mention of Bitcoin lending.

They also crossed the 50 exahash per second (EH/s) milestone, wrapping up 2024 at 53 EH/s. Although the actual hashrate contributing to the Bitcoin network stayed stable at 47 EH/s, which was a relief in a year marred by reduced rewards following the April 2024 halving.

The Mining Boom Enters 2025

Bitcoin mining has kicked off 2025 with a bang. On January 3, the total hashrate hit a staggering 1,000 EH/s—double that of 510 EH/s seen in January 2024. They did this all while rewards were halved from 6.25 BTC to 3.125 BTC.

Sure, that chopped miner revenues in half, but rather than pump the brakes, miners are spending billions on better rigs and power-efficient systems to keep the profit engine humming along. These upgrades might be paying off, as they appear to be driving efficiency up and rewarding miners even as rewards drop.

As Bitcoin’s prices surged above $108,000 in December, miners started exploring creative ways to make bank. Securities lending, once an afterthought, suddenly became the hot new thing. By lending out their Bitcoin, they’re getting shares in ETFs and then turning around and loaning those out for profit.

Then there’s high-performance computing (HPC) – companies like BitDigital and Terawulf are transforming their mining operations into centers for AI and HPC tasks. Given their energy capabilities, it’s predicted to yield billions by 2027.

Understanding the Risks and Rewards of Crypto Loans

Accessing Resources

Bitcoin loans can give you immediate cash flow without selling your Bitcoin, which is a win if your operational costs are high. But you have to maintain your collateral’s value.

Market Fluctuations and Capriciousness

That volatility is a double-edged sword. If Bitcoin’s price drops, the borrower might have to pledge more collateral or risk liquidation. Sounds like a risky long-term strategy.

The Sandbox of Regulation

The regulatory landscape is shaky, which creates more uncertainty around whether Bitcoin loans will be around for long.

Short-Term Win

Loans might fit the bill for short-term needs, like paying for immediate operational costs. But they might not be great for long-term strategy, given the volatility.

Alternative Priorities

Though there are many things you can do with Bitcoin loans, the risks involved make it tricky to use for a long-term strategic play. Other stable financing options may suit companies better.

MARA’s Mining Highlights Against the Backdrop

MARA’s choice to lend Bitcoin reflects a wider trend in the crypto space. The strides they’ve made in mining are commendable, considering their hashrate and Bitcoin hoards.

Diverse Trading Platforms

Not all platforms are the same – they have unique LTV ratios, loan rates, and terms. Platforms like Binance and Coinbase have flexible options, but risks persist.

Oversight or Lack Thereof

The lack of hard oversight, unlike traditional banks, and the risk of platforms going down adds more uncertainty to using Bitcoin loans long-term.

Efficient Repurposing of Infrastructure

Miners can utilize their GPUs, which were left over after Ethereum’s shift to Proof of Stake, for AI tasks, making the most of their resources.

Managing Energy and Costs

Bitcoin miners have this flexibility to cut down on power consumption 5%-31% of the time, quickly shutting down machines and saving money while supporting the grid.

The Future of Loans and Mining in Bitcoin

Steady Income Streams

HPC and AI allows Bitcoin miners to stabilize their revenues, especially when the market turns sour. It’s a shield against the unpredictable nature of Bitcoin mining.

Infrastructure Upgrades

Bitcoin mining companies can also repurpose their infrastructure into HPC data centers, maximizing their access to renewable energy.

Potential Drawbacks

Crypto lending provides substantial interest but it carries huge risks, from market swings to security breaches. It’s vital for participants to do proper research and manage risk.

AI and Machine Learning in Mining

AI and machine learning are on the horizon, which could reshape mining strategies. Miners can use AI to discern when, how, and what to mine—giving them an edge. It’s also set to empower real-time analytics and predictive insights, making for an efficient mining environment.

Final Thoughts

MARA’s adventurous Bitcoin lending strategy seeks to trim operational costs during market turbulence. While it comes with its own dumps and dives, the rewards could be potentially substantial. The industry is evolving and MARA’s moves are going to be keenly observed.