I’ve got to begin my latest take on the recently renamed Marathon Digital (NASDAQ:MARA) with an explanation. I bought some put options against MARA stock, which of course makes me short on this pure-play Bitcoin (CCC:BTC-USD) investment. But in my case, being short doesn’t necessarily translate to being bearish.
Frankly, I’m disappointed in myself regarding the latest calls I’ve made regarding cryptocurrency-related companies. On a longer-term basis, I believe in these blockchain firms and the broader crypto economy. However, I have not liked the on-again, off-again profile of Bitcoin and other digital tokens.
Rethinking Crypto Exposure With MARA Stock Short
Before I initiated my short position in MARA stock, I was going in and out of my crypto holdings. Because I did this so many times, I lost a ton of money in transaction fees. At the moment, I’m back on the bullish side of things. However, watching the volatility of Bitcoin and the apparent inability of the bulls to drive the price back up to the $50,000 level, I’m again rethinking my exposure.
However, what the last drop to around the $45,000 level taught me is that you can’t ignore the strong overriding optimism in the BTC market. Therefore, holding — or “HODL-ing” in crypto parlance — seems the best bet.
Nevertheless, I wanted some downside protection in case stuff happens – which invariably at some point it will. Therefore, I went short on MARA stock as an insurance play. If the cryptocurrency market plummets, I believe this will disproportionately affect the blockchain and crypto-mining firms.
It’s my small way of hedging my bets. Granted, I’d much rather buy Bitcoin put options, but that ability is not readily available. Therefore, going short something like MARA stock is my best bet, all things considered.
But I do want to make it clear that if virtual currencies continue to move higher, thereby nuking my MARA trade, you won’t find a happier person than me.
A Little Skepticism Wouldn’t Hurt
Having got that explanation out of the way, what do I really think about MARA stock? On one hand, I can appreciate the burgeoning interest in both virtual currencies and blockchain-related companies. Here’s what our own Vivian Medithi had to say last week:
The movement in MARA comes at a time of rabid interest in cryptocurrencies, not only from retail investors but also from larger institutional players. Citi Bank analysts said today that Bitcoin was fast approaching “a tipping point” for adoption, and that the cryptocurrency could “become the currency of choice for international trade.”
Indeed, some market commentators can see Bitcoin one day reaching $1 million, given the further upside implied by such eventual widespread adoption. As one of the largest bitcoin miners in the U.S., Marathon Digital stands is poised for big gains, though that opportunity isn’t without risk.
That last point is no joke. I genuinely want to believe in these crazy price targets. I’d be very happy in an environment where BTC trades for $100,000, which would imply a significant boost for major alternative cryptocurrencies or altcoins. Of course, what BTC advocate wouldn’t want the price to hit the unicorn $1 million a pop?
Certainly, the big institutions can help get it there, particularly if they ignore other safe-haven assets. It’s fun on the way up. But I don’t know if we’d be on the same page on the way down.
You see, I can trust the HODL-ers to “diamond hands” their way down to penny stock territory if need be. I don’t mean to be flippant but judging from some of the HODL-ers comments — not all, I repeat, not all — there is growing mental illness in this space.
But what of the alpha dogs of finance who are waking up to Bitcoin? They’re not going to watch idly by as their balance sheets blow up. No, they’re going to lead the charge in the selloff if the volatility becomes danger close.
Take a Modest Position at Most
Having analyzed the price action of the cryptocurrency complex over the last few days, I think I’m perfectly 50/50 in my outlook. While I recognize the potential for Bitcoin to hit $100,000 in the next few months, I also see it falling to $30,000 or worse.
In short, I’m hoping for the former. But I’m willing to hedge against the latter. This may mean more short positions in MARA stock or it may mean I trim some fat off my crypto portfolio.
If you’re really dead set on the institutional players argument, I’m not against a modest position in MARA stock. Should cryptos overcome the wall of worries, this really could fly.
However, institutional players are not HODL-ers. If you can understand this point and take an agnostic view of the crazy blockchain world, you’re better off than most.
On the date of publication, Josh Enomoto held a short position in MARA and a long position in BTC.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.