It’s been a great start to the new year for digital mining play Marathon Patent Group (NASDAQ:MARA). But could MARA stock be done printing money for investors? Let’s look at what’s happening in shares, both off and on the price chart, then offer a risk-adjusted position aligned with those findings.
If you’re going to have a discussion of MARA, it’s best to begin and end with Bitcoin. They’re inexorably linked due to Marathon’s business of mining the market’s top cryptocurrency. And on Monday BTC sank 5.71%. It was the digital coin’s largest loss since Feb. 23 when Bitcoin tumbled nearly 10%.
Don’t feel too bad for Bitcoin bulls, though. Despite a price hit in BTC triggered by worries of India banning all cryptocurrency investment, the DeFi or decentralized finance champ is having a stellar 2021. And in turn, that success has been a boon for MARA stock’s mining business and its shareholders.
Even after Monday’s losses, Bitcoin is enjoying a fairly heady year-to-date gain of roughly 90% after hitting record highs this past weekend. More impressive, BTC is still hanging on to a $1.0 trillion capitalization. It’s a feat matched in the U.S. stock market by less than a handful of companies led by Apple (NASDAQ:AAPL). And stacked against the FOREX market, only a handful of fiat currencies maintain larger money supplies than Bitcoin.
At the same time, shares of MARA are up a stunning 308% this year. That’s more than three-fold BTC’s gains, while the stock’s valuation is just over $4 billion in market capitalization.
Strong Performance
To be fair and to state the obvious, Marathon Patent Group isn’t going to be in the same conversation as AAPL or one of its trillion-dollar plus cohorts. Still, today’s mid-cap status has impressively come a long way in a short time. And the performance becomes even more amazing if we go back less than six months when MARA was fetching around $1.50 a share and valued at less than $150 million.
The success MARA is enjoying is also for good reason of course. Each of the outfit’s coins that it mines today can generate a sale worth more than $55,000 based on the current Bitcoin market price. And many believe the best may be yet to come.
Sources of Inspiration
Square (NYSE:SQ). JPMorgan Chase (NYSE:JPM). PayPal (NASDAQ:PYPL). Tesla (NASDAQ:TSLA). Investors in MARA stock could find inspiration from those massive businesses. In various capacities each has shown itself to be an early adopter of Bitcoin, other cryptos and blockchain. And let’s just say they’re not positioning to save the manatees or for some other ESG minded principal. They’re buying into this market due to its importance as a tool for business and to make tons of money.
MARA investors might also find motivation from Wall Street. Look out AAPL and U.S. dollar! It may just be a matter of time before BTC towers above those other markets and that should be a windfall for MARA.
Top fund manager Cathie Wood of ARK Investment sees BTC hitting $500,000 on the back of greater involvement from institutional investors who increasingly will need to allocate a portion of their portfolios into the digital currency market.
On the way to Wood’s target, Bitcoin will have to surpass a Citigroup analyst forecast which estimates the crypto could reach $318,000 by December. On a pound-for-pound basis, however, and not the British currency, the most positive outlook for MARA stock however may be Kraken’s Jesse Powell. Earlier this month the crypto exchange CEO estimated BTC may be worth $1 million per coin or more over the next decade.
MARA Stock Daily Price Chart
Source: Charts by TradingView
Despite the obvious enthusiasm for BTC and even if bullish estimates are reached and eventually toppled, it’s never going to be a straight line to instant riches. There’s always going to be an India, Treasury head or some other regulator coming out of left field to ensure the path to those gains will occasionally prove gut wrenching or even too painful to bear. The same could be said for MARA stock.
Technically and today, I’ll admit the price pattern on MARA’s provided daily chart is of interest for making a purchase decision. Shares have shaped a bullish high-level double bottom or ‘W’ formation around its 2017 crypto bubble high. The stock has also put together a buy signal above its mid-pivot. As well, the pattern is well-supported after successfully testing the 50% retracement level from last year’s fourth quarter lows.
On the other hand and despite this year’s gains, Marathon Patent is no Bitcoin. While MARA has handily outperformed on a percentage basis, BTC left its former bubble high of $19,6666 in the rearview mirror last November. Is the relative weakness a canary in the coal, umm crypto mine?
Seeing More Positives Than Negatives?
What I’d suggest for investors still seeing more positives than negatives in MARA stock is to consider a longer-dated, out-of-the-money bull call spread. I’m favoring the January $50/$65 call combination.
The duration of this type of vertical should help with staying the course if BTC is to reach new heights, but maybe not quite Citigroup’s $318,000 this year. In tow, MARA should easily be fetching something far north of today’s patterned high of $49.41. And for roughly 8% of MARA stock price, this investor is both well-protected from devastating downside risk and in strong position to enjoy own triple-digit gains not unlike today’s MARA s stock.
On the date of publication, Chris Tyler holds, directly or indirectly, positions in Grayscale Bitcoin (GBTC), Grayscale Ethereum Trust (ETHE) and Grayscale Ethereum Classic (ETCG), but no other securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
