Against the backdrop of wildly fluctuating Bitcoin prices, the stock prices of cryptocurrency miner Marathon Digital Holdings (MARA) have been equally volatile. Should you buy MARA stock regardless? To answer that question, a bit more detail is needed.
Marathon mines cryptocurrencies, focusing on generating digital assets and the blockchain ecosystem. It gets its remuneration for mining in Bitcoin. Then, they sell this Bitcoin to generate revenue. The operations of Marathon Digital are funded through financing as well.
MARA’s mining power is growing
In August of this year, MARA produced 469.6 newly minted bitcoins. With that, the company increased total holdings of the asset to almost 6,700. The corresponding fair market value is around $316.4 million. Their total liquidity was roughly $387.3 million, while cash on hand was $70.9 million.
Riot Blockchain (RIOT), a competing miner, produced just 491 Bitcoin in the whole first quarter. Its gross margin is 67.6%, making it one of the most profitable mining companies in the industry. On the other hand, Marathon Digital’s gross profit margin in Q1 was -498.9%.
Wall Street is keen on the stock
After news emerged that BlackRock, the biggest asset manager in the world, had bought a 6.7% stake in the company in June, its stock rose by 6.5%.
Growing capacity
In the next few months, Marathon Digital plans to increase machine installations. By the end of 2021, the company expects delivery of 75,000 miners and another 15,200 at the beginning of 2022. By the end of Q1/22, Marathon Digital anticipates 103,120 miners in total. It can mine around 60 Bitcoin a day with such capacity.
Bitcoin connection
It’s only logical that MARA shares will rise and fall with Bitcoin prices. The stock peaked at 57.75 on April 6, around the time many were buying Bitcoin in exceptionally large amounts. In comparison, it was trading at just 10 just a few months earlier. At the end of July, shares rose by 15% as Bitcoin passed $39,000 again. According to MarketSmith chart analysis, MARA stock is trading above its 50-day line.
Measures of the Biden administration don’t seem to be helping. The stock dipped after the US government announced on July 15 it had built a task force to limit use of cryptocurrency in ransomware attacks. Their efforts will be aimed at tracing funds paid as ransom to hackers.
Marathon Digital has a composite rating of 71. Its grade of A- in Accumulation/Distribution signals strong buying by institutional investors.
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