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 finished his lines Credit with Silvergate. Given the adverse market conditions, this development came as the pro-crypto bank ceased operations.
The payment reduced the debt exposure by $50 million and increased the company’s unrestricted Bitcoin holdings by 3,132 BTC, held as collateral. Hugh Gallagher, Marathon’s CFO, said in the statement:
“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 $5 million. Dollars”.
Measures that will help Marathon Digital
In fact, the reduction of debt obligations will help the company and the mining industry as a whole. Marathon Digital is a company that specializes in Bitcoin mining.
As a mining company, their business model involves using high-powered computers to solve complex math problems to validate Bitcoin transactions and earn rewards in the form of new BTC.
The company requires a significant capital investment in expensive computer equipment, electricity, and other operating costs to run this business. The company took on debt to finance these investments, which could be a source of financial stress.
Nonetheless, the mining giant proactively restored its balance sheet by paying off some of its debts and releasing its restricted BTC.
For example, Marathon Digital liquid 30 million dollars in revolving loans with Silvergate in December, thus freeing up 3,615 BTC held as collateral. Such examples will help struggling miners release additional liabilities that could restrict further growth.
Silvergate ceases operations
The timing of this development to reduce exposure was interesting. The pro-crypto bank took steps to “cease operations.”
The announcement was “in light of recent industry and regulatory developments,” BeInCrypto reported on March 8. Silvergate Bank’s liquidation plan included the “full refund of all deposits”.
Settlement occurs just one day after an issue arose report hinting at a possible revival. The bank was discussing ways to avoid a shutdown with US federal regulators.
Needless to say, the decision has caused immense short selling activity against its share price ($SI).
Numerous clients severed their alliance with the bank as covered by BeInCrypto. Silvergate Bank Shutdown May Leave a Ripple Effect in the Cryptocurrency Industry and pave the way for existing and new entrants to fill the void.
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