Marathon Digital: Buy This Bitcoin Mining Stock During Crypto Crash (NASDAQ: MARA)
After Bitcoin’s recent crash, I decided to transfer funds to my favorite crypto-mining stock, Marathon Digital Holdings (NASDAQ: MARA).
Bitcoin sold off recently on fears of rising rates after investors received the Notes from July 2022 Fed Minutes.
I’m extremely bullish on bitcoin and blockchain technology for the long term and don’t mind buying MARA shares at a discount.
While most BTC miners sold their Bitcoin to keep the lights on, I was impressed with Marathon’s uncompromising HODL strategy in the company’s latest Q2 quarterly report.
In this article, I will provide a full update on Marathon Digital’s business and give several reasons why I have repurchased shares of Marathon Digital.
Second Quarter Business Update
My article on MARA stocks went into great detail about why the Bitcoin halving in 2024 is such an important event. Now I want to switch gears and cover how Marathon is doing after reading their latest Q2 2022 quarterly report.
The company suffered a massive drop in bitcoin production due to the shutdown of the Montana mining facility in July. A massive storm hit the town of Hardin, Montana on June 11 and knocked 75% of Marathon’s miners offline. The company lost nearly 30,000 miners over several weeks, which severely affected its total mining production in the second quarter of 2022.
Second quarter Bitcoin production was 707 BTC (up 8% YoY) while Bitcoin price fell 57% over the same period. It was a tough quarter for all crypto stocks as Bitcoin tumbled after Terra Luna crashed.
Total revenue reached $24.9 million and the company recorded a net loss of $191.6 million (-$1.75 per share). Impairment charges of $207.3 million made up the bulk of Marathon’s losses from lower Bitcoin prices.
The good news is that Marathon Digital held 10,127 BTC on its balance sheet at the end of July 31, 2022 and crossed the 10,000 BTC milestone for the very first time.
The total number of installed miners reached 49,000 at the end of the second quarter, but the company maintains its goal of nearly 200,000 installed miners by the start of 2023.
Marathon Digital moved all of its miners from Hardin, Montana to North Texas after signature a 254 MW deal with Applied Blockchain (APLD).
Additionally, the Company continues to expect its mining operations to be 100% carbon neutral by the end of 2022.
The company has $120.7 million in cash on its balance sheet in the second quarter of 2022.
Why I am more bullish on Marathon Digital
After BlackRock sign an agreement with Coinbase (COIN) to buy Bitcoin for its customers, I knew that many institutional investors would finally accept Bitcoin as “real money” for the very first time.
This event alone is a huge bullish indicator for crypto stocks as BlackRock wants to buy Bitcoin while prices are falling.
Marathon Digital has more Bitcoin than any other North American cryptocurrency miner and has just moved its facilities from Hardin, Montana to northern Texas and North Dakota.
BTC held by top exchange-listed crypto miners
|Company||BTC Holdings in July 2022|
|Digital Marathon (MARA)||10,127|
|Hut 8 (HUT)||7,736|
|Riot Blockchain (RIOT)||6,696|
|Scientific Core (CORZ)||1,205|
Source: author, with data from company filings
Texas is a crypto-friendly state this will help the company increase the production of BTC.
Whenever I invest in a new and emerging industry, I look for the best company that can scale and grow in revenue over time.
Marathon’s 10,127 BTC holdings have a current market value of around $212 million and could be useful if the company wants to sell some to expand operations.
The company used several different methods to raise funds during the second quarter, including a $161 million common stock sale and a $100 million new loan.
Marathon is an asset-light company with around $14 million in quarterly capital expenditures and expects to spend around $150-175 million to deliver and deploy its remaining miners.
This is a dark time for crypto companies and Marathon could fall victim to several risk factors such as:
- The decline in Bitcoin prices which increases depreciation expenses and delays mining expansion.
- Issuance of more common shares to fund operations, which will dilute shareholders.
- Increased energy costs due to the Russian-Ukrainian war which will increase capital expenditure.
- Another potential storm or natural disaster suspending mining production at facilities in North Texas or North Dakota.
This is not a guarantee that all publicly traded crypto miners will survive until the next Bitcoin halving in 2024. Marathon has enough cash and Bitcoin on its balance sheet to stay in business.
The biggest risk in my opinion is falling Bitcoin prices which would send crypto investors running for the exits.
MARA stock was trading as low as $6 in June 2022 and could trend lower if Bitcoin remains bearish.
Personally, I buy MARA shares whenever they drop below $15 or less than $2 billion in market capitalization.
YOLO stocks have been battered recently, so now is the time to invest in crypto stocks. The best time to buy stocks is when no one wants to own them and I don’t think things could get any worse for the crypto industry.
There are currently dozens of publicly traded crypto miner stocks, but most of them have abysmal balance sheets or relatively small BTC holdings.
Marathon is the “Alpha” of the group with over 10,000 BTC and counting. That’s why I stocked up on MARA stocks during the recent market sell-off and will add more as we approach next year.
#Marathon #Digital #Buy #Bitcoin #Mining #Stock #Crypto #Crash #NASDAQ #MARA #crypto strategy