Marathon Digital (MARA) stock price has completely diverged from Bitcoin in the past few weeks. MARA has crashed to $19.70, a 42% dip from its highest level this year. This crash happened even as Bitcoin surged to a record high of over $73,000.
Bitcoin and Marathon divergence
Bitcoin mining companies were always seen as being BTC proxies for a long time. In most periods, they used to do better than Bitcoin when BTC was rising and fall at a faster pace when it was in a downtrend.
A good example of this is what happened in 2023 as Bitcoin mining stocks like Marathon surged by more than 300%.
Recently, however, this trend has changed. Bitcoin has continued to press ahead, soaring to over $73,000. At the same time, most mining companies have dived, with MARA being down by over 40% from its highest level this year.
This price action is mostly because of the impact of Bitcoin halving, a process that will happen in April next month. Halving is a situation where the number of Bitcoins mined everyday crashes by half. In this case, the figure will move from about 900 coins per day to 450.
This situation will have an immediate impact on Marathon Digital, a company that has over 230k miners and a hash rate of 24.7 exahash. It produced 12,852 Bitcoins in 2023, a big increase from the previous year’s 4,144.
Therefore, if the trend remains and the company fails to increase capacity, it will produce under 7,000 coins this year.
Marathon Digital and other miners have spent years preparing for this halving event, which explains why it has been adding more miners. These companies also need Bitcoin price to continue rising in the next few years to compensate the volume loss.
Most importantly, MARA needs to diversify its business from Bitcoin mining. There can only be 21 million Bitcoins ever and over 19.6 million have already been mined. This means that only less than 1.4 million coins will ever be mined and the difficulty is soaring.
Marathon has already started this diversification with the launch of Enduro, a Bitcoin layer 2 network that is set to supercharge the ecosystem.
The most recent results showed that the company has a strong balance sheet with over $1 billion in cash and Bitcoin. It has the option of raising $1.5 billion using its ATM facility, which partly explains why the stock has dived.
Marathon Digital stock price forecast
The daily chart also explains why the MARA stock price has nosedived recently. This decline started when the shares formed what looks like a double-top pattern around $32. In most cases, this is one of the most popular bearish signs.
The stock has dropped below the 50-day Exponential Moving Average. It has also retested the crucial support at $19.83, which was its highest swing on July 14th. The Relative Strength Index (RSI) has also pointed downwards.
Therefore, I suspect that the stock will have some volatility, which could see it move to the neckline of the double-top at $14.56. In the long term, however, MARA shares will likely bounce back and move above $30.
Contributors
