Marathon Digital (MARA) is a leading Bitcoin mining company with a market cap of over $4.8 billion, making it much bigger than CleanSpark, which has a valuation of over $2.93 billion.
The company makes its money by mining Bitcoin and then selling it to the market either through exchanges or over-the-counter (OTC) deals. Therefore, Marathon does well when Bitcoin is in an uptrend, which explains why its annual revenue rose from $117 million in 2022 to $387 million in 2023.
Marathon Digital is going through some headwinds, which explains why it is diversifying its revenue sources. Bitcoin mining difficulty is rising, and the recent halving event has led to a sharp decline in mine production.
As a result, the company has started mining Kaspa, another popular proof-of-work (PoW) cryptocurrency valued at over $3.9 billion. Marathon believes that mining Kaspa could bring in $87 million in revenues with 95% margins.
Marathon Digital stock was trading at $16.24 while its HypeIndex value rose to 86%.
Positive hype
Marathon Digital has started to accumulate Bitcoin as it seeks to emulate MicroStrategy, the biggest corporate holder of Bitcoin globally. It raised $300 million in convertible senior notes and spent $249 million of these funds acquiring Bitcoins.
The company holds over 25,000 coins, currently valued at over $1.45 billion or over 30% of its total valuation.
The closest comparison to this is MicroStrategy, which holds 226,500 coins valued at $13.17 billion, meaning that investors are willing to pay a premium since the company has a valuation of over $25 billion.
Marathon has said that its Bitcoin holdings are long-term, meaning that it is not looking to sell even when Bitcoin rises.
Meanwhile, the company published mixed results this month. Its revenues rose by 78% to $145 million while its net loss jumped to $199.7 million because of a fair value of its digital assets.
The hype has also increased as analysts expect that Bitcoin price will bounce back later this year. The likely catalysts will be the start of interest rate cuts by the Federal Reserve now that inflation has eased, the end of the US election, and the end of summer.
In crypto bull markets, Bitcoin mining companies tend to do better than the coin itself, as we saw earlier this year.
Marathon’s diversification into BTC ownership, Artificial Intelligence, and energy will help it grow its valuation.
Recent disclosures showed that companies like Goldman Sachs, Morgan Stanley, and HSBC have also bought Bitcoin ETFs.
According to Yahoo Finance, the average estimate for the Marathon Digital stock is $8.18, higher than the current $3.95.
Negative hype
Marathon Digital has also generated some negative hype in the past few weeks.
MARA stock has dropped by over 52% from its highest point this year while Bitcoin is down by over 20% in the same period.
Marathon’s Bitcoin operations will go through substantial pressure as the mining difficulty rises. Data shows that the mining difficulty has jumped to a record high recently and the trend may continue. It produced 22.9 coins per day, down from 32.2 in the same period in 2023.
The company will need to grow its mining operations to gain market share in the industry.
Additionally, Bitcoin has remained in a consolidation phase in the past few weeks even as American stocks are nearing their all-time highs.
Summary on Marathon Digital
Unlike other companies, making future forecasts of Bitcoin mining companies is harder because their movements depend on BTC movements. On the positive side, in the long-term, Bitcoin has done well as it jumped from less than $1 in 2009 to over $56,000.
The other positive is that Bitcoin has formed a cup-and-handle pattern on the weekly and monthly charts. Therefore, if this pattern works well, there is a likelihood that the coin will have a bullish breakout.
Marathon Digital’s stock remains above the ascending trendline that connects the lowest swing since October. Therefore, the stock could recover as buyers target the 50-day moving average at $20.
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