Marathon Digital Holdings Stock Struggles As Bitcoin Falls

Marathon Digital Holdings (MARA), a cryptocurrency miner, has been fluctuating significantly along with the price of bitcoin. Here’s what the technical analysis and fundamentals have to say about buying MARA stock right now.

What is MARA?

It is a digital asset technology firm that mines cryptocurrency. The blockchain ecosystem and the creation of digital assets are the main goals of Marathon.

Initially known as Marathon Patent Group, the business started accumulating encryption-related patents in 2010. Moreover, MARA stock first went public in 2013. Later, the organization changed its name to Marathon Digital Holdings on March 1, 2021. Fred Thiel took over as CEO from Merrick Okamoto on April 26, 2021. Additionally, Thiel became chairman on January 1, 2022.

How does Marathon Digital work?

Marathon Digital basically provides the processing power required to mine bitcoins. Processing or validating transactions is the process of mining bitcoin. Meanwhile, hash rate is the measure of how quickly a cryptocurrency miner processes transactions. So, the more transactions a miner can process quickly, the more money it makes.

On the other hand, Marathon Digital receives payment in bitcoin for mining. The business can then sell this bitcoin to make money. Moreover, it also uses the money to support its business.

Bitcoin’s cost has dropped to under $20,000. On March 1, 2022, it reached a high of almost $44,249 as governments around the world tightened economic sanctions against Russia following its invasion of Ukraine. As a result, some experts are suggesting that bitcoin may serve as a safe haven for Russians and Ukrainians trying to get money out of their respective countries.

But recently, it has started trading similarly to how stocks do.

CEO is ready to acquisition 

Thiel indicated in an interview with Bloomberg that he would take into account a proposal for the “right price.”

He said he’d have to take it under consideration if somebody gives a significant premium over their market cap. So, that might be the appropriate thing to do for the investors.

Moreover, energy companies, according to Thiel, are well-positioned to monopolize bitcoin mining.

“Over time, the most successful bitcoin miner would be a generating company, as they could sell their own electricity to themselves at a reduced price,” he continued.

Regulations for crypto coming

On June 7, the first significant piece of bipartisan legislation to regulate cryptocurrencies was introduced by Democratic Senator Kirsten Gillibrand and Republican Senator Cynthia Lummis. The bill tasks the Commodity Futures Trading Commission with regulating digital assets, which it classifies as commodities like wheat or oil.

Moreover, the Responsible Financial Innovation Act is a crucial first step in defining the legal framework for the markets for digital assets.

According to a statement from their offices, the legislation is a “landmark bipartisan measure. It will create a complete regulatory framework for digital assets that encourages responsible financial innovation. Additionally, it’ll bring flexibility, transparency, and robust consumer protections while integrating digital assets into existing law.”

In a tweet on June 7, Lummis stated, “The United States is the global financial leader. Moreover, it’s vitally critical the U.S. plays a leading role in this new frontier.”

On hearing the news, MARA shares and other bitcoin play dropped.

The bill comes in response to President Biden’s executive order from March 9. It requested that the federal government assess the advantages and disadvantages of cryptocurrency.

Further, the White House issued a statement saying, “The United States must continue technological leadership in this rapidly expanding field. It should promote innovation while reducing the risks for consumers, businesses, the larger financial system, and the climate.”

The order lays forth a national policy for digital assets based on six core priorities. It includes financial stability, illicit finance, U.S. leadership in the international financial system and economic competitiveness, financial inclusion, and responsible innovation.

The mining capacity of Marathon Digital increases

On March 4, Marathon claimed that in February 2022, it created 360.3 self-mined bitcoin. It’s an increase of 729% from the 43.4 self-mined bitcoin produced in February 2021.

The business claimed to have grown its overall holdings of bitcoin to about 8,956 BTC. Moreover, it has gained a fair market worth of about $386.8 million.

About $106.4 million in cash is on hand at Marathon. Meanwhile, total liquidity, calculated as the sum of cash and bitcoin holdings, was roughly $493,2 million.

According to the business, Bitmain delivered about 7,600 top-tier ASIC miners in February. It brought the total number of operating miners in its fleet to 35,510. Meanwhile, Marathon had a fleet of 36,830 active miners as of June 2022.

Besides, by the beginning of 2023, the business anticipates having roughly 199,000 active miners.

Though earlier this year, analyst Lucas Pipes cut the price forecasts for the cryptocurrency miners Marathon Digital, Riot Blockchain (RIOT), Greenidge Generation (GREE), and Stronghold Digital Mining (SDIG). And the reason was higher-than-expected capital expenses.

SEC investigation

On November 15, 2021, Marathon Digital’s shares fell 27%. This happened after it disclosed in a filing that it had gotten a subpoena by the Securities & Exchange Commission. Then the corporation and a few officials have been requested to provide the SEC with communications and records about the Hardin, Montana, data center site.

However, the company stated in the statement, “We understand that the SEC may be looking into if there may have been any violations of the federal securities legislation. We are working along with the SEC.”

Marathon Digital signed a number of agreements on October 6, 2020, to design and construct the Hardin data center. Also, it issued 6 million restricted Marathon common shares as a condition of the agreement.

Additionally, the company stated that it plans to issue $500 million in senior convertible notes on November 15, 2021. This is to buy more Bitcoin and Bitcoin miners.

Stock technical analysis for MARA

Early in April 2021, Marathon Digital was developing a bearish head-and-shoulders pattern. However, after that, the stock declined, and no new pattern emerged.

Moreover, MARA shares have been on a roller coaster since they are strongly correlated with Bitcoin prices. On November 9, 2021, MARA shares reached a 52-week high of 83.45. However, since then, the stock has substantially declined. According to MarketSmith’s chart analysis, shares are currently trading at roughly $10. It is close below their 50-day line.

On June 21, 2021, Chinese sanctions against bitcoin mining grew more severe. As a result, Bitcoin’s value plunged to below $33,000, causing shares to decline as much as 5.5%. China outlawed all cryptocurrency transactions on September 24, 2021. The action caused Bitcoin to lose $2,000 in value.

On July 15, 2021, the Biden administration announced the creation of a task force to combat the use of cryptocurrencies in ransomware attacks. Its endeavor will focus on tracing money paid to hackers.

However, the introduction of a Bitcoin futures ETF and the likelihood that others will follow fuelled the cryptocurrency’s ascent to a new high of almost $66,000 on October 20, 2021.

The relative strength line for MARA stock is still at extremely low levels and is declining. Moreover, Marathon Digital has a Composite Rating of 26 and a very poor RS Rating of 16 out of a possible 99.

Fundamental analysis of MARA stock

The business underperformed in expected Q2 results. It revealed a $1.75 per share loss. Moreover, analysts at FactSet had predicted a loss of 7 cents per share. It is down from a loss of $1.09 in the same period last year.

However, the deeper net loss, according to management, was partially offset by a gain on the sale of equipment. Moreover, it was primarily caused by the decline in bitcoin’s price in the second quarter of 2022. Besides, the accelerated recognition of expenses related to the previously announced exit from the Hardin, Mont., facility has had an impact.

The business missed views and had $24.9 million in sales. On Wall Street, $38.8 million was anticipated. After hours, shares decreased 2.4% while during regular trading, MARA shares had increased 1.8%.

As of June 30, Marathon Digital had boosted its overall Bitcoin holdings to 10,055 BTC. As of July 31, there were 10,127 BTC in total ownership, with a fair market value of $236.3 million. $120.7 million in cash was available overall.

MARA stock has an EPS Rating of 7 out of a possible 99 due to continuing losses.

However, MarketSmith reveals that MARA stock has an Accumulation/Distribution rating of A-, indicating significant institutional buying. As of June 2022, 296 funds owned 25% of the MARA stock.

Q2 Bitcoin Production

During Q2 2021, Marathon Digital produced 707 self-mined bitcoin. It was up 8% year over year but down 44% from Q1 production.

However, in Q2, the business “continued to work through many operational difficulties,” according to CEO Fred Thiel.

He stated in a statement released after the results that “energization delays, maintenance and weather challenges in Montana. Meanwhile, it’s also an almost 56% fall in the price of bitcoin throughout the quarter. This has adversely harmed our bitcoin output and financial results.”

On the other hand, on July 18, Marathon Digital announced it has inked hosting contracts with third parties. They will supply a total of up to 254 megawatts of power and capacity, to help reduce this issue.

However, these factors impacted Marathon Digital’s revenue. So, MARA finalized new contracts with Applied Blockchain (APLD), Compute North, and a number of other service providers besides existing ones.

It has generated 1,966 bitcoin so far this year, a 132% rise from the same time last year. Moreover, the total number of installed miners at Texas plants that are pending energization rose to 29,640 miners.

The total amount of bitcoins held is 10,055 BTC, with a fair market value of $198.9 million, a considerable decline due to the recent sharp decline in bitcoin prices. Its total bitcoin holdings as of May had a fair market value of $315.1 million, totaling 9,941 BTC.

The amount of cash on hand was about $88.7 million. Meanwhile, the total liquidity, calculated as unconstrained cash and readily accessible credit, was about $153.7 million. Both grew considerably from the previous month. So, cash on hand and total liquidity totaled roughly $59.6 million and $86 million respectively in May.

Is it time to buy MARA stock?

MARA stock is a dangerous investment due to its volatility. It is mostly caused by its connection to Bitcoin. Additionally, Marathon Digital has failed to demonstrate a pattern of robust, steady revenue and earnings growth.

So, the bottom line is following the release of June Bitcoin output numbers, Marathon Digital’s shares surged 21%. However, MARA stock is not a buy given that it missed Q2 earnings and hasn’t developed any clear patterns. Additionally, in recent days, Bitcoin prices dropped to less than $20,000. Thus, investors should still keep a watch on MARA stock. Meanwhile, since it has gathered a powerful computational arsenal.