Until Things Change, It’s More of the Same For Marathon Digital Holdings

I’ve written about Marathon Digital Holdings (NASDAQ:MARA) a couple of times since the beginning of the year. In both cases, I was left underwhelmed about MARA stock. Some two months removed from my most recent article, my opinion hasn’t changed. 

a crypto mining rig
Source: Mark Agnor / Shutterstock.com

As MARA stock investors already know, there is a high correlation between Marathon Digital Holdings and Bitcoin (CCC:BTC). In fact, if you were to overlay the price chart for MARA stock with that of Bitcoin in the last 12 months; they’d look remarkably similar. 

Marathon Digital bulls could make the argument that the same could be said of a gold mining stock like Barrick Gold (NYSE:GOLD). Its price chart has a correlation to the price of physical gold. However, Barrick Gold is a known quantity. And the GOLD stock price hasn’t closed above $30 per share at any time in the last five years. This is despite Barrick Gold having a market of over $33 billion as of this writing. 

Here are three reasons why I believe there are better options than MARA stock.


Better Ways to Dabble in Bitcoin Than MARA Stock 

I understand the argument that investing in MARA stock may be a good way for investors to get exposure to Bitcoin without buying the actual digital currency. However, it’s not the only game in town anymore. 

For example, the direct listing of Coinbase Global (NASDAQ:COIN) gives investors similar exposure to Bitcoin as well as other cryptocurrencies. And consider that JPMorgan Chase (NYSE:JPM) has plans to launch an actively managed Bitcoin fund of its own. 

In fairness, it is likely that Marathon will begin to mine other cryptocurrencies. That would be a good first step. However for the foreseeable future, the fortunes of MARA stock revolve around Bitcoin. 

Marathon Continues to Be Unprofitable 

My InvestorPlace colleague Alex Sirois pointed out that it costs Marathon Digital Holdings about $2 dollars for each dollar of Bitcoin revenue it mines. Sirois also made the very relevant point that the vast majority of Bitcoin that Marathon owns has been purchased, not mined.

Even contributor Muslim Farooque, who made a bullish case for MARA stock, did not dispute the fact that the company does need to become profitable.

Mining Isn’t a Green Activity 

There’s also the environmental impact of mining Bitcoin. Reasonable people can disagree about the actual effect this has on the environment. And some will argue that as the nation transitions to renewable energy resources, the effect will be lessened.

However, just because it’s not a major issue, doesn’t mean it won’t become an issue at all. Cryptocurrency is continuing to go under the microscope by regulators. If the climate advocates begin to question the cost-benefit proposition of cryptocurrencies, no amount of greenwashing will be able to make MARA stock seem like a responsible investment.

A Last Word on MARA Stock 

Only one analyst currently provides a rating for on MARA stock. To be fair, the analyst from J.C. Wainwright does rate the stock as a buy with a price target of $50. However that rating was made in March when Bitcoin was going up with no end in sight.

Now that we may be seeing that end, that correlation between Marathon and Bitcoin is not working in investors’ favor.

For MARA stock to live up to its elevated expectations, Bitcoin will need to live up to the same expectations. Therein lies the problem. Bitcoin’s gain will bring more ways for investors to gain exposure to BTC as well as other cryptocurrencies. 

On the other hand, if BTC fails to live up to its expectations (and I don’t mean strictly price), then the case for MARA stock becomes far less compelling.

heads I win, tails you lose scenario doesn’t excite me. But that doesn’t mean it can’t be a short-term investment. But then again, if you’re looking to profit off BTC without owning the cryptocurrency, why not just invest in Coinbase?

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

Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019. 

Article printed from InvestorPlace Media, https://investorplace.com/2021/05/mara-stock-will-stay-same-until-delivers-on-changes/.

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