The last time I wrote about Marathon Digital Holdings (NASDAQ:MARA) and MARA stock, it was still known as Marathon Patent Group. It changed its name in late February to focus on Bitcoin (CCC:BTC-USD) mining. 

The thing is, you probably think I wrote about Marathon in early February or something along those lines. Nope. 

The last time I wrote about Marathon was mid-August when I argued that only those that fully understand cryptocurrencies have any business owning MARA stock. 

Boy, have things changed in the seven months since then. The stock is way up, and so is the company’s ability to mine Bitcoin.

Down almost 40% over the past month, I’ll figure out if my skepticism about the company should change and if investors ought to buy on the dip.

How Has Marathon Changed in Seven Months?

Well, other than a new corporate name, the big change is the rate at which it’s able to mine Bitcoin.

On March 4, Marathon issued a press release stating that Bitmain would ship 6,300 Antminer S-19 PRO ASIC Miners to the company. Once in place, Marathon’s miners will produce 1.4 exahash per second (EH/s). In August, I wrote that Marathon was producing 56 petahash per second (PH/s).

For those unaware, an EH is a quintillion hashes per second. A PH is one quadrillion hashes per second. A quintillion has three more zeros. For perspective, a trillion has 12 zeros. So, a quadrillion is 25% larger than a trillion, and a quintillion is 20% larger than a quadrillion and 50% larger than a trillion. 

Here’s what the numbers look like written out with all their zeros:

56 PH/s = 56,000,000,000,000,000

1.4 EH/s = 14,ooo,ooo,ooo,ooo,ooo,ooo     

Take a bunch of zeros off both and you get 14,000 divided by 56 or 250x its production seventh months ago. 

Now, I’m not suggesting this justifies a 10-fold increase in its share price — it was trading at $3.87 on Aug. 14, 2020, and now trades at $30.03 as I write this — but it certainly explains some of the appreciation. 

Two things come to mind in regards to this entire situation. 

MARA Stock Rides Bitcoin’s Coattails

The first thing I think of when I read Marathon’s March 4 press release about the Bitcoin miners: How can I own Bitmain? 

Apparently, the power struggle at the company prevented the business from hitting up the public markets. However, now that co-founder Jihan Wu has left Bitmain and the power struggle apparently resolved, Bitmain can go public at a valuation of as much as $50 billion. Marathon’s current market capitalization is less than $4 billion.

From where I sit, betting on the maker of equipment to mine Bitcoin makes greater sense from a risk perspective than betting on one of the many Bitcoin miners. 

Here’s another perspective, which I argued in my August article. 

“Unless I’m missing something, a cryptocurrency version of Barrick Gold (NYSE:GOLD) could swoop in with its billions of cash and permanently impair Marathon’s business,” I wrote at the time. 

Well, there are now two Bitcoin ETFs in Canada and plenty will hit America soon enough. The best option, in my opinion, will be the ETF that holds numerous cryptocurrencies other than Bitcoin, such as Ethereum (CCC-ETH-USD), Ripple (CCC:XRP-USD), and Stellar Lumens (CCC:XLM-USD). 

But that’s a discussion for another day. 

The second thing that comes to mind is that Marathon is now completely tethered to Bitcoin. The company’s purchase of $150 million in the cryptocurrency seals its fate. If you own MARA stock, you might as well convert much of your cash to Bitcoin because you’re implicitly stating by your actions that the cryptocurrency will move higher.

Forget for a moment the terrible environmental cost of Bitcoin — the global mining of Bitcoin requires three times the electricity requirements of New Zealand — and remember that the value of Bitcoin can move lower, as it’s done on several occasions over the past five years. 

The Bottom Line

While a lot has changed at Marathon Digital over the past seven months, I don’t see the point in buying its stock when you can own Bitcoin directly. 

Either buy Bitcoin or Bitmain when it’s a public company. Buying MARA seems pointless to me.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.