MARA Stock Forecast: Is Marathon Digital a Buy?

Written by Sean GraytokUpdated: 8th May 2022
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This MARA stock forecast will analyze the investment potential of one of the world’s largest bitcoin miners.

We will also explain why Marathon Digital is amongst the best crypto stockson the market.

MARA Stock Forecast: Background

Marathon is a digital asset technology company that mines cryptocurrencies, focusing on the blockchain ecosystem and the generation of digital assets.

Marathon verifies transactions on the Bitcoin blockchain and is rewarded in bitcoin for doing so.

Marathon operates its proprietary data center in Montana with a power capacity of 105 megawatts. It also owns 2,060 advanced ASIC Bitcoin Miners at a co-hosted facility in North Dakota.

Marathon recently announced it will host around 73,000 of its miners at a new 300-megawatt data center in Texas.

MARA Stock Forecast: Investment Potential

#1. Bitcoin Exposure in the Stock Market

If you’re researching bitcoin mining stocks, you probably know that you cannot buy bitcoin in the stock market.

However, people are finding creative ways to achieve BTC exposure in their Vanguard account.

While there is the Grayscale Bitcoin Trust (GBTC) and a series of crypto indices, many are turning to publicly traded cryptocurrency mining companies like Marathon Digital Holdings.

Buying shares of Marathon isinvesting in Bitcoin’s infrastructure — a ‘pick-and-shovel investment strategy for the fast-growing crypto ecosystem.

#2. Marathon has +133,000 Bitcoin Miners

On August 2, 2021, Marathon announcedthe purchase of $120.7 million worth of mining machines from Bitmain, a privately owned Beijing company that designs application-specific integrated circuit (ASIC) chips.

This contract for 30,000 additional miners will bring Marathon’s fleet to over 133,000 miners.

According to Marathon, this brings the company’s hash rate to 13.3 EH/s, representing around 12% of the Bitcoin network’s total hash rate.

Hashrate is a measure of the computational power per second used when mining. It indicates the number of calculations per second that can be performed.

So, the higher the hash power, the higher the probability of earning bitcoin. More earned bitcoin results in more miners, which further increases the hash power, and so on.

There you have it — the Marathon flywheel.

The company’s favorable valuation will allow it to continue to deploy more miners and grow its fleet.

#2. Blockchain’s Potential

The Bitcoin Blockchain is essentially a database that records transactions. Lowercase’ bitcoin’ is just the native currency that enables these transactions.

The potential for blockchain technology is largely debated, but that’s not stopping exploration.  Here’s a laundry list of potential applications:

  • Voting mechanisms
  • Personal identity security 
  • NFT marketplaces
  • Real estate processing platform
  • Secure sharing of medical data
  • Music royalties tracking
  • Supply chain and logistics monitoring 
  • Anti-money laundering tracking system
  • Original content creation

A growing percentage of people think the Ethereum blockchain is better suited to support these applications, especially decentralized finance, or “DeFi.”

However, we think the superior security of the Bitcoin Blockchain makes it the best option in the long term.

In addition, increased functionality is already being built into the network via upgrades like Taproot and layer 2 solutions like the Lightning Network.

Taproot will enable greater transaction privacy and efficiency, but it will also unlock the potential for smart contracts.

A smart contract is a transaction protocol that is intended to automatically execute according to the terms of a contract or agreement, thus removing third-party oversight.

Here are some examples:

  • Daniel creates a smart contract that sends 10 BTC to his son’s wallet when he dies
  • A politician campaigns on improving the condition of roads in the area — a smart is created that automatically increases the state’s allocation to local infrastructure by 10% if she is elected
  • A farmer in South America buys crop insurance that automatically pays out if rainfall is less than 30 inches that year

Bitcoin miners like Marathon make all of this possible — security is non-negotiable for these applications.

#3. Capitalist-Driven Incentives for Renewable Energy R&D

Crypto mining requires a ton of energy, which is Marathon’s largest expense by a landslide.

Therefore, Marathon is incentivized to find the most cost-effective energy sources to mine bitcoin.

This is why it’s common for mining operations to be near power plants.

For example, Marathon’s mining center in Montana is adjacent to a coal plant to capture the energy that would otherwise be wasted.

In an interview with Anthony Pompliano, Marathon’s CEO Frank Thiel said, “The biggest problem in power today is not that there isn’t enough of it that’s green, it’s that it can’t get to the right places.”

He added, “We enable a renewable wind farm or solar farm to get into business and provide baseload for us and then build out their power distribution network.”

If anyone is going to find a way to repurpose residual energy from steam or distribution lines, it will be bitcoin miners.

Capitalist incentives have always been the primary catalyst for innovation. Why would this not apply to the renewable energy industry?

The financial incentives are there — we expect technological advancements to follow.

MARA Stock Forecast: The Moat

So, what separates Marathon Digital from the rest of the pack?

High Barriers to Entry + Well Capitalized

The mining industry is capital intensive and has high barriers to entry.

As the BTC block reward decreases in volume (via thehalving schedule), demand for such rewards will likely increase.

Mining difficulty will increase accordingly to accommodate this uptick, thus requiring more computational power to verify blocks.

The average Joe isn’t providing this computing power. The machines are too expensive.

Companies like Marathon, Riot, and HIVE have eclipsed these capital-intensive barriers and will benefit from their early-stage investments — if demand for bitcoin continues.

The institutions are waking up — Fidelity and Blackrock have taken significant stakes in Marathon, acquiring 7.4% and 6.7% of the company, respectively.

MARA Stock Forecast & Operations Update

This section will examine Marathon’s bitcoin production and mining operation updates for February 2022:

  • Produced 360 self-mined bitcoin during February 2022, a 729% increase from 43 self-mined bitcoin in February 2021
  • Increased total bitcoin holdings to approximately 8,956 BTC
  • Increased hash rate 8% from the month prior after deploying and energizing 2,800 miners in the month of February 
  • Existing fleet consists of 35,000+ active miners 

As scheduled, Marathon deployed more ASICs and grew its hash rate in the month of February. We expect to see the same going forward. 

MARA Stock Forecast: The Competitors

North American crypto mining is a fast-growing industry with only a handful of publicly traded companies. Here are Marathon’s top competitors in the crypto mining business:

  • Riot Blockchain (RIOT)
  • HIVE Blockchain Technologies (HIVE)
  • Canaan (CAN)
  • Hut 8 Mining Corp (HUT)
  • Argo Blockchain (ARBK)
  • Bit Digital (BTBT)
  • Bitfarms (BITF)

In addition to these small-cap mining operations, Marathon Digital also competes with well-known large-caps for ‘stock market exposure to Bitcoin.’

Here’s the list of companies that MARA competes with for this type of investor:

  • Coinbase (COIN)
  • Robinhood (HOOD)
  • Square (SQ)
  • PayPal (PYPL)
  • MicroStrategy (MSTR)
  • Grayscale Bitcoin Trust (GBTC)
  • Nvidia (NVDA)
  • Advanced Micro Devices (AMD)

The crypto industry is still very young — we anticipate years of volatility in its assets and companies alike.

Marathon Stock Forecast: The Risks

#1. ESG Confusion

Earlier, we discussed how bitcoin mining might have a long-term net positive impact on the environment, but Marathon and the bitcoin community have their work cut out for them when trying to convey this message.

It’s easy to point fingers at miners’ energy consumption and question the merits of it in a vacuum, but we believe the mainstream critiques lack nuance.

However, our opinion doesn’t influence the share price of Marathon Digital Holdings.

ESG is the latest FUD (fear, uncertainty, doubt) to hit the bitcoin community.

Whether it’s true or not is irrelevant in the short term. MARA is vulnerable to FUD.

#2. Concentrated Risk in Bitcoin

Your intentions matter when considering whether or not to invest in Marathon.

We think owning the asset outright is better than buying Marathon if you’re simply looking for exposure. Thanks to exchanges like Gemini, BlockFi, Coinbase, and Kraken, it has never been easier to buy bitcoin.

Many financial advisors recommend ‘getting off zero’ or increasing your bitcoin exposure to a number higher than zero.

But at the end of the day, bitcoin is still a volatile asset. You must be willing to stomach the drawdowns before investing in this space.

#3. Elon Musk, Bitcoiners, and Marathon

Following the Elon Musk, Tesla (TSLA), and bitcoin fiasco, Michael Saylor of MicroStrategy and the leading bitcoin miners in North America met with Musk to form the “Bitcoin Mining Council.’

According to Saylor, the council’s goal is to “promote energy usage transparency & accelerate sustainability initiatives worldwide.”

This includes standardizing energy reporting, pursuing industry ESG goals, and educating the marketplace.

The idea of executives meeting behind closed doors to discuss bitcoin did not sit well with the bitcoin community.

Marathon’s CEO Fred Thiel went on CoinDek TV to respond to the community’s criticism.

He said, “I think if you look at the ambitions of the council, you’ll find that the council wants to be open to anybody who’s a miner, and it’s really about sharing best practices.”

He added, “nobody’s trying to centralize anything.” And they couldn’t — even if they tried.

As Nic Carter pointed out, Hut 8, Galaxy Digital, Riot Blockchain, Marathon, Core Scientific, Hive Blockchain, and Blockcap control less than 10% of the global computing power on the Bitcoin network.

#4. General Risks With Mining

While ‘general risks with mining’ apply to the other enterprise miners as well, they are important to know prior to investing in Marathon. 

Scenario: The price of bitcoin significantly increases, which incentivizes more miners to compete for block rewards. As miners buy additional equipment, the price of the equipment also increases. So, a hypothetical mining rig that cost $1,000 before the bull run now costs $5,000. Marathon purchases a certain amount of these miners at the increased price. They now have to mine 5x the amount of bitcoin to break even compared to buying the equipment before the run up. Remember, this ‘break even’ point is denominated in USD. If Marathon happens to buy at a local top and the price of bitcoin falls 50%, the value of the bitcoin mined is now worth less in terms of USD. Marathon now must mine 10x the amount of bitcoin to break even on its initial investment. 

Granted, averting this scenario comes down to timing the market, which is impossible. Nonetheless, the economics of mining are the foundation of Marathon’s business. 

Marathon does not control the price of bitcoin, the price of miners, the block reward and blocks per year, and the network hash rate. 

There’s only so much that can be done to mitigate these variables if they turn south.

MARA Stock Allocation in Your Portfolio

If step one is deciding whether or not to invest in MARA, then step two is deciding how much to buy. These questions might help you out:

  • Will MARA outperform bitcoin over the next ten years?
  • Is Marathon better positioned than the other North American miners like Riot Blockchain or HIVE?
  • Do you have too much exposure to a single industry?
  • Are blockchain ETFs like BLOK, BLCN, or BKCH better investments?
  • Are the crypto exchanges like Coinbase and Robinhood better sources of public market exposure?
  • Will general regulation in the crypto industry affect Marathon?
  • Will ESG regulation or mandates severely impact MARA?
  • Does MARA have to decrease its correlation to bitcoin? Is that possible?
  • Is MARA just a leveraged bitcoin security?

MARA Stock Forecast: FAQs

Is Marathon Patent Group a buy?

Marathon Digital Holdings (MARA), formerly known as Marathon Patent Group, is a buy if you’re looking to invest in Bitcoin’s infrastructure in the public markets. Shares of Marathon have traded between $18.32 and $83.45 over the last year.

What does Marathon Digital do?

Marathon Digital is one of the largest enterprise mining operations in North America. The company mines bitcoin and receives ‘block rewards’ for mustering up the required computing power to verify blocks on the blockchain.

Is MARA a buy or sell?

MARA is a buy if you seek secondary exposure to bitcoin in the public market and are willing to invest in a ‘centralized’ asset within a decentralized industry. MARA is a sell if you think bitcoin is going to zero.

Bottom Line: MARA Stock Forecast

It will be interesting to watch the correlation between BTC and MARA moving forward.

If their correlation remains high, Marathon Digital will probably do alright if bitcoin goes where we expect it to go.

However, if you’re a true believer in Bitcoin, it’s probably less risky to own the underlying asset than shares of a centralized mining company like Marathon.

Keep Reading:

This article is for informational purposes only, and it is not intended to be investment advice. Read our editorial guidelines and public equities research methodology to learn more about how we researched MARA stock.

Sean Graytok
Sean Graytok

Sean Graytok is our Co-Founder and leading expert in investing and financial management. His work has been cited in leading industry publications, such as InvestorPlace and Business Insider. Sean is interested in the people and technologies that are improving the world.