Bitcoin miner Marathon Patent Group (NASDAQ:MARA) is gaining handsomely at the market, with MARA stock up more than 90% this month thanks to movements in Bitcoin (CCC:BTC-USD).
Bitcoin prices continue to climb to fresh highs, smashing past the $55,000 mark most recently. Hence, the popular cryptocurrency surpassed a market capitalization of $1 trillion.
Having entered the year at approximately $28,900, the currency is up more than 90%. Consequently, It’s onward and upward for MARA stock and other related investments, with Bitcoin set to eclipse the $100,000 mark by December this year.
In addition to ramping up its mining operations, Marathon recently scooped up 4,812.66 Bitcoin for $150 million. Therefore, in many ways, the company has become a defacto investment choice for those interested in the currency.
With the impressive growth, the stock is now trading at parabolic levels. However, there is plenty of upside potential as it builds on its operational and financial momentum through 2021.
Ramping up Mining Operations
Bitcoin mining operations entail two primary production costs: hardware and energy. The specialized mining equipment works to solve the Bitcoin code and subsequently earns 6.25 BTC per block. Therefore, a company can maximize gross profits by keeping its effective cost of production to a minimum.
Marathon recently announced a partnership with Beowulf Energy LLC, which currently owns 2.3 gigawatts of energy assets. A new Bitcoin mining data center will be opened up in Beowulf’s existing facility in Hardin, Montana. The overall goal is to get the aggregate mining costs down, which could potentially drop by at least 38% from the current level.
Additionally, Marathon will deploy 11,500 S19 Antminers by the second quarter of 2021. Coupled with its separate facility, it expects to generate 2.6 exahash rate per second (EH/s). As we advance, the Hardin data center could potentially expand to 30,000 S19 Miners.
Its partnership with mining-rig circuit chips supplier, Bitmain, is another feather in Marathon’s cap.
The company states that after deploying its entire fleet of 23,560 miners it expects to harvest 15-20 BTC per day. The average cost per BTC is roughly $3,863, which comes to $77,260 for 20 BTC mined per day. According to my math, that means the gross profit per day could amount to $1.065 million with Bitcoin’s baseline price of $57,115.
Supply Constriction and Marathon’s Edge
Bitcoin’s price is climbing, in part, because its structure halved the output this year. The supply of coins is halved after every four years (the last halving was in 2016).
With the reduction in Bitcoin supply, there is a limited supply of Bitcoin miners. Moreover, there are very few publicly traded domestic Bitcoin miners, and none of those listed are large-cap.
Companies such as Marathon and RIOT (NASDAQ:RIOT) have established themselves in the nascent crypto-mining industry. These companies have survived the prior halving and the subsequent crash. Therefore, the newcomers entering the industry are less likely to survive future pressures, giving these seasoned campaigners the edge.
Bottom Line on MARA Stock
The Bitcoin resurgence and the novel coronavirus have dominated headlines in the past year. Investors and companies in the Bitcoin business have significantly benefited from the colossal growth in its price.
Bitcoin miner Marathon has successfully weathered the previous crisis in the crypto-world and now looks to gain handsomely in this period of impressive growth. In doing so, it has invested heavily in its mining resources and capabilities.
Being a seasoned player in the mining field, it has the edge over its competition in sustaining investor interest. Therefore, MARA stock is a highly attractive investment at this time.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.