Marathon Digital (NASDAQ:MARA) continues to be in focus as a way for crypto investors to gain exposure to the price of the key commodity it mines – Bitcoin (BTC-USD). With Bitcoin prices remaining volatile, so too has MARA stock in recent weeks. Following the approval of 11 spot Bitcoin ETFs by the Securities and Exchange Commission, all eyes were on Marathon Digital as a way to play this trend. This Marathon stock analysis will examine the pros and cons of investing in this company.
However, Marathon Digital faced the same fate many other stocks felt in this space. A “buy the rumor, sell the news” narrative was built, with Bitcoin-related assets falling after these approvals.
With that said, now is the time to ask the question of whether MARA stock has declined too far, or if more downside is likely. Let’s dive into the bull and bear case on this stock.
The Bull Case
In 2023, Bitcoin surged by 164%, surpassing traditional assets like gold, partly driven by optimism for SEC-approved Bitcoin spot ETFs. The recent approval by the SEC is truly good news for Bitcoin holders and Marathon Digital, especially those who plan to hold on to these assets long-term.
These new Bitcoin ETFs are anticipated to strengthen institutional adoption of cryptocurrencies and crypto-related assets. With more comprehensive investor access, this should contribute to longer-term stability for the crypto sector as a whole.
Additionally, if ever high-interest rates continue to decline, the thirst for crypto might pick up. With interest rates largely expected to be cut by mid-year, other assets that don’t provide a yield (such as Bitcoin) could rise in relative value. Additionally, a lower U.S. dollar would be good for Bitcoin prices, as a store of value, implicitly affecting Marathon Digital positively. This is a key point to this Marathon stock analysis.
If Bitcoin prices continue higher, Marathon Digital could see its revenue and profit numbers surge higher. That’s because the company’s debt is largely denominated in dollars, with its revenue coming in the form of Bitcoin. Thus, Marathon Digital remains a leveraged way to play this space and should see outsized moves to the upside in times of bullish sentiment around Bitcoin.
The Bear Case
Of course, the inverse is also true when it comes to the effect Bitcoin prices have on MARA stock. When Bitcoin prices decline, Marathon Digital’s valuation can take an outsized hit. Herein lies the conundrum many investors are in.
Initially, the SEC’s approval of 11 spot Bitcoin ETFs appeared advantageous for Marathon Digital, drawing attention to the cryptocurrency market. Yet, the broader implications are nuanced. Before this approval, stock traders had limited options for Bitcoin exposure, making Marathon Digital stock a clear choice for bulls. This is the downside revealed as part of this Marathon stock analysis.
MARA stock is no longer a clear pick, with multiple spot Bitcoin ETFs now available. Investors might shift from Bitcoin-mining stocks to these ETFs, impacting the Bitcoin-asset landscape. The popularity of low-fee spot Bitcoin ETFs could rise. However, this may not be a significant concern for those explicitly seeking Bitcoin mining exposure.
Be Cautious with MARA
Considering recent BTC price trends, the ongoing sell-off of MARA stock may continue over the short term. While Marathon Digital’s gains from Bitcoin ETF-related events may not fully retract, an immediate rebound seems unlikely. However, selling/avoiding MARA might not be necessary.
There’s considerable long-term potential for Marathon shares. Though Bitscoins’s future price direction is uncertain, crypto enthusiasts cite macro factors for a bullish Bitcoin case, potentially benefiting Marathon.
Yet, Marathon Digital’s resurgence doesn’t solely hinge on a Bitcoin recovery. Marathon’s mining growth, with 290% year-over-year production growth seen in December on a year-over-year basis, could propel shares, even if Bitcoin prices remain stagnant.
On the date of publication, Chris MacDonald 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.
