Marathon Digital Holdings Is Worth the Gamble

Investors looking for a cryptocurrency stock that isn’t played out yet might want to consider Marathon Digital Holdings (NASDAQ:MARA) stock.

a crypto mining rig
Source: Mark Agnor /

The Las Vegas, Nevada-based cryptocurrency miner has had a great run so far this year, having increased 260%. Since the first trading day of 2021, MARA stock has grown from $11.01 a share to its current price of $38.04. And that’s after a few strong pullbacks along the way.

The stock’s 52-week high was $49.41 and many analysts say the share price can retest those highs in coming weeks.

While Marathon Digital Holdings stock tends to rise and fall with the broader cryptocurrency market, especially Bitcoin (CCC:BTC-USD), it is not as widely known or overbought as some other cryptocurrency securities such as Riot Blockchain (NASDAQ:RIOT) and the Grayscale Bitcoin Trust (OTCMKTS:GBTC).

For investors who can stomach some volatility and risk, MARA stock might be worth a small position. 

Riding the Crypto Craze

Marathon Digital Holdings is one of the four largest cryptocurrency miners along with SOS Limited (NYSE:SOS)Bit Digital (NASDAQ:BTBT) and The9 Limited (NASDAQ:NCTY). These companies mine for cryptocurrencies by solving cryptographic equations with sophisticated computers.

The process of cryptocurrency mining involves validating data blocks and adding transaction records to a public ledger known as a blockchain. For completing this complex process, miners are rewarded with cryptocurrency assets such as Bitcoin.

And among the major cryptocurrency miners, Marathon Digital Holdings is the second biggest after Bit Digital in terms of the speed at which it can mine cryptocurrencies and the number of crypto assets it holds. As with all cryptocurrency companies, the performance of Marathon Digital Holdings stock is closely tied to the fluctuations in the value of cryptocurrencies. The price of Bitcoin has a big influence on MARA stock, but so too does the price of cryptocurrencies such as Ethereum (CCC:ETH-USD).

At times, MARA stock has fallen as much as 41% in a week. At other times, the share price has jumped as much as 54% during a single week of trading. This volatility afflicts the entire cryptocurrency sector right now.

While Bitcoin, Ethereum and other cryptocurrency assets are gaining mainstream acceptance, they remain largely speculative assets that continue to be marketed as an alternative to holding a commodity such as gold or a currency such as the U.S. dollar.

Investors should expect that the volatility in Marathon Digital Holdings share price will continue for the foreseeable future.

Weak Earnings

Just as volatile stock prices are to be expected with companies operating in the cryptocurrency space, so too are weak earnings. As with other cryptocurrency miners, Marathon Digital Holdings continues to struggle to generate revenues and profits.

For all of 2020, Marathon Digital generated just $4.4 million in revenue. This despite the fact that the company mined 157 Bitcoins in the fourth and final quarter of last year.

For all of 2020, Marathon Digital Holdings reported a net loss of $10.4 million. That’s a sign of how hard it is to generate profits in a still fledgling industry.

While the results are disappointing and even a little shocking for a company that has a market capitalization in excess of $4 billion, part of the problem is that companies such as Marathon Digital only generate revenue when they sell their holdings of Bitcoin, Ethereum and other crypto assets. They are not able to claim revenue when they receive a cryptocurrency from their mining efforts.

If you calculated the value of the 157 Bitcoin that Marathon Digital mined in the fourth quarter by the cryptocurrency’s current price of $56,000, it would be worth $8.8 million, double the revenue the company claimed for all of last year.

But again, they’d have to sell that Bitcoin and convert it into cash to report it as revenue.

MARA Stock Is Worth the Risk

Cryptocurrencies appear to have tipped over into mainstream acceptance and are becoming more legitimate. Bitcoin’s 750% price increase over the past 12 months, climbing from $6,455 for one coin to its current price of just over $54,000, cannot be ignored.

And cryptocurrency miners are benefiting from the huge growth. In fact, by some measures, stocks of cryptocurrency miners such as Marathon Digital Holdings have been outperforming Bitcoin and other cryptocurrencies. MARA stock has risen more than 7,500% in the past year. In March 2020, it was trading at just 45 cents.

The bottom line is that MARA stock represents too good an opportunity to pass up. The risk and volatility are real and should not be discounted. But the potential profits are also real and make Marathon Digital Holdings worth a stake.

Investors looking to benefit from the current crypto craze should consider Marathon Digital stock. Just keep the position small and be prepared to sell at the first signs of a cryptocurrency crash.

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

Article printed from InvestorPlace Media,

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