Marathon Digital: Is the Bitcoin Miner a Better Bet Than the Coin Itself?

Will Ashworth
3 min read
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Marathon Digital Holdings (NASDAQ:MARA) had an exceptional year in 2023, mining 12,852 Bitcoins, 210% more than in 2022. As a result, its revenues increased by 229%. to  $387.5 million.

MARA stock is up nearly 200% over the past year. While Marathon’s stock did well, Bitcoin did better, up 218% over the same period. Here are the pros and cons of buying MARA stock vs. Bitcoin or the iShares Bitcoin ETF (NASDAQ:IBIT).

The Pros of Buying MARA Stock Vs. Bitcoin/IBIT

As long as Bitcoin (BTC:USD) remains in circulation and continues to appreciate, Marathon’s business case remains in place. It will continue to buy other Bitcoin miners and mining assets, adding to its capacity and producing more Bitcoins.

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As long as the trajectory is higher over the long run, MARA shareholders ought to do well.

In December, Marathon announced the acquisition of two operational Bitcoin mining sites from subsidiaries of Generate Capital for $179 million. The acquisition added 390 MW (megawatts) capacity to its mining operations. It provides the company with its first wholly-owned mining facilities, which now maintain 45%  of its capacity.

One way that Marathon can add value beyond the price of Bitcoin is by delivering the greenest, lowest-cost mining operations. As the press release stated, the cost per coin at the company-owned mining sites would fall by 30%. As other third-party hosting clients leave their space, it will install its own miners, reducing costs.

“By transitioning ownership of the sites to Marathon, Generate will be able to continue their focus on greening data centers, and Marathon will own physical assets that reduce our bitcoin production costs and provide us with ample room to grow,” stated Marathon CFO Salman Khan in December.

How is this different from gold miners looking to reduce their all-in production costs at their mining facilities? It’s not.

The Cons of Buying MARA Stock vs. Bitcoin/IBIT

Bitcoin miners run the risk of being too attached to the rise and fall of the price of Bitcoin. Consider this analogy: despite gold miners becoming lower-cost producers, their returns over the past five, 10, or even 20 years haven’t been able to keep up with gold itself.

I can see the same thing playing out for Bitcoin.

Investors make the perceived safer bet in Bitcoin miners like MARA to gain side-door participation in the cryptocurrency industry without the same volatility. Unfortunately, as it’s played out in gold, that’s not a sure thing.

In fact, it might be worse because, like gold, Bitcoin has tangible value based on demand. However, should the industry be banned from mining more Bitcoin, the value of the existing coins would rise, while the value of the mining assets would fall.

The Bottom Line

I have a hard time understanding why anyone interested in Bitcoin would bet on a Bitcoin miner when they can own the real thing or an ETF facsimile.

To me, buying MARA or one of the other Bitcoin miners is akin to purchasing a sports car and being financially saddled by the expense of keeping the vehicle on the road.

Bitcoin is a sports car free of headwinds. Marathon Digital is not. For this reason, I would rate MARA a Hold. I wouldn’t buy it, but that doesn’t mean you shouldn’t.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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.

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