Marathon Digital: A Potential Bitcoin Play for Upcoming Halving and Elections
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Bitcoin mining stocks have experienced significant gains recently due to improved economic conditions and Bitcoin’s recent surge past $48,000. Despite speculation about a correction, most traders and analysts are bullish on the sector, particularly with the upcoming Bitcoin halving and the presidential election. There is optimism surrounding Marathon Digital (NASDAQ: MARA) due to its substantial Bitcoin reserves, providing investors with strong exposure to price movements.
The Profile of the Company
Marathon leads the market as the largest publicly traded Bitcoin miner, boasting a robust self-mining hash rate and substantial Bitcoin reserves. Their strategy revolves around mining and holding Bitcoin as a long-term investment, banking on its potential for increased value due to its limited supply and growing adoption. Presently, Marathon operates mining facilities in the US, alongside partnerships in Abu Dhabi and Paraguay. They’re transitioning towards full operational control of their sites in Granbury, Texas, and Kearney, Nebraska, aiming to lower costs and enhance efficiency, especially with the impending Bitcoin halving.
Bitcoin Halving
Bitcoin’s 4th halving event, slated for April 19, 2024, will see block rewards decrease from 6.25 to 3.125 Bitcoin, historically driving significant price fluctuations. Previous halvings showcase this trend: the first, in 2012, saw Bitcoin surge from $3 to $42 within a year. Similarly, the 2016 halving resulted in a 141% increase in Bitcoin’s value in a year, with subsequent remarkable growth. The 2020 halving propelled Bitcoin from $7,232 to over $56,000 within a year. This year, Bitcoin’s 67% surge since April 19, 2023, suggests a potential break past $100,000 by 2024-end, igniting the mining sector. Past halvings averaged a 298% increase until year-end. While projecting Bitcoin at over $192,000, caution is warranted.
The Impact of the Bitcoin Halving on Miners
While Bitcoin’s halving historically boosts its price, miners face challenges as block rewards halve, increasing mining difficulty. To maintain profitability, miners rely on post-halving price surges. Marathon stands out in this scenario. With a hash rate of 26.7 EH/s, surpassing peers like Riot and CleanSpark, Marathon forecasts a 30% hash rate growth by 2024-end. In January alone, Marathon mined 1084 Bitcoin despite disruptions, outperforming Riot and CleanSpark. With a projected hash rate expansion, Marathon remains a promising player in the Bitcoin mining landscape.
| Miner | Q2 (EH/s) | Q3 (EH/s) | Q4 (EH/s) |
| Marathon | 29.3 | 30.5 | 31.7 |
| Riot | 20.1 | 24.4 | 28.8 |
| CleanSpark | 20.0 | 20.0 | 20.0 |
Miners as Amplified Bitcoin Proxies
Bitcoin miners serve as leveraged proxies for Bitcoin, making them attractive investments in light of the bullish outlook for Bitcoin in 2024. Notably, Marathon has consistently outpaced Bitcoin during major catalysts. In 2023, despite Bitcoin’s significant price spikes triggered by events like the banking crisis and BlackRock’s ETF filings, Marathon, Riot, and CleanSpark showed even greater gains. For instance, during the banking crisis, while Bitcoin surged by 50%, Marathon, Riot, and CleanSpark saw increases of 93%, 134%, and 49%, respectively. Similarly, when BlackRock filed for a Bitcoin ETF, the mentioned miners recorded impressive gains of 93%, 92%, and 66%, respectively, outperforming Bitcoin’s 19% jump. This pattern highlights the potential of Bitcoin miners to deliver amplified returns compared to Bitcoin itself.
Marathon’s Distinctive Position
Positioning Bitcoin miners as superior investments to holding Bitcoin during bull markets, Marathon emerges as a standout choice in the mining sector for several compelling reasons.
Firstly, Marathon boasts the largest HODL stash among public miners, holding 15,741 Bitcoin valued at over $820.6 million. In contrast, competitors like Riot and CleanSpark hold significantly fewer Bitcoins, giving Marathon an advantage in potential value appreciation with any increase in Bitcoin’s price.
Secondly, Marathon’s robust hashrate positions it favorably for post-halving Bitcoin production. With its higher hashrate, Marathon can solve more blocks, yielding more Bitcoin compared to its peers.
Additionally, Marathon maintains a substantial cash balance of $318.9 million, surpassing Riot and CleanSpark. When combined with its HODL stash, Marathon’s liquidity exceeds $1.1 billion, offering ample resources for strategic growth initiatives. While not debt-free like Riot or boasting industry-leading mining costs like CleanSpark, Marathon’s strong Bitcoin holdings, formidable hashrate, and healthy cash reserves make it a compelling choice in the Bitcoin mining landscape.
When evaluating Bitcoin miners, traditional valuation metrics like P/S or P/E may not capture their true worth, as their value lies in profitable Bitcoin mining. Instead, the price-to-hash (P/H) ratio emerges as a more fitting indicator, revealing the cost investors bear per unit of hash power.
With Marathon’s 26.7 EH/s hash rate, Riot’s 12.4 EH/s, and CleanSpark’s 14.69 EH/s, their respective P/H ratios stand at 172.37, 198.36, and 163.94.
A lower P/H ratio indicates a better value proposition, positioning Marathon second only to CleanSpark and ahead of Riot. Considering Marathon’s superior hash rate and robust cash reserves, it emerges as the top pick among Bitcoin mining stocks, primed for potential gains amid upcoming catalysts.
Risk Involved
Like any investment, investing in Marathon entails risks worth considering. Foremost among these is dilution, with Marathon’s outstanding shares increasing by nearly 110% from Q1 2022 to Q3 2023.
However, the most significant risk lies in Bitcoin’s price itself. Marathon’s bullish outlook hinges on Bitcoin’s appreciation, particularly post-halving when mining becomes more challenging. Should Bitcoin fail to rise or experience a decline due to unforeseen events, Marathon, heavily reliant on its Bitcoin stash for value, could face substantial challenges.
