Why Marathon Digital Holdings Remains Compelling

Gary Bourgeault profile picture
Gary Bourgeault


  • Marathon Digital is wise to hold on to Bitcoin, even though it may eventually have to sell some if prices remain under pressure.
  • If the price of Bitcoin doesn't rebound, losses will increase to concerning levels.
  • Even with these challenges, Marathon is rapidly increasing its EH/s and believes it will reach 23 EH/s close to mid-2023.
  • Adding a significant number of miners will offset some of its current losses.
  • If the price of Bitcoin continues to climb, it bodes well for Marathon because it leverages the price of Bitcoin, under most conditions, better than its peers.

Glowing dark background with bitcoin symbol.


Marathon Digital Holdings (NASDAQ:NASDAQ:MARA) has been experiencing the pain of a weak Bitcoin (BTC-USD) price in response to challenging economic conditions, which, as usual, have hit high-growth assets like Bitcoin.

A major challenge for the Bitcoin miner has been to continue to grow the number of miners it deploys and increasing its EH/s, which will provide opportunities to mine more Bitcoin.

Much of its near-term performance hinges on whether or not the price of Bitcoin will meaningfully rebound in the last quarter of 2022 and into 2023. If it does, a lot of the company's challenges will be solved. And if it doesn't, it'll probably be forced to sell some Bitcoin in order to raise capital.

In this article we'll look at the pros and cons of taking a position in Marathon, and why I think it remains a compelling play in the Bitcoin mining sector.

Major challenge

In order to maintain its competitive edge, Marathon must continue to increase the number of miners it operates in order to boost its EH/s. That means it has to spend a lot more money to do so.

In the first half of 2022, Marathon boosted revenue to $76.6 million, an increase of 99 percent. At the same time, its net loss soared from $25.5 million to $204.6 million, as costs of miners jumped.

One potential positive our this is the low cost of Bitcoin has resulted in a number of its peers selling off some of their miners. If Marathon can grab some low-cost miners, it'll significantly lower costs of miners, which had been individually priced at over $10,000.

This has had an impact on Marathon's cash and equivalents, which has dropped by 49 percent year-over-year, to $86.5 million. Cash on hand at the end of August stood at $71.4 million. Even so, a healthy debt-to-equity ratio of 1.2 means it shouldn't have trouble raising capital if and when it needs to.

The major risk I see with Marathon is it may take longer than expected for it to return to a sustainable upward growth trajectory. It has the ability to raise capital and sell Bitcoin if it needs more resources.

It is my belief that once there is more clarity from the Federal Reserve, which should come by the end of 2022, it will provide investors with more data to make a more informed decision.

Either way, there is no doubt in my mind the price of Bitcoin will strongly recover, and when it does, Marathon will take off again. The question is how much pain shareholders will have to endure, and for how long, before it does.

Current Bitcoin production and mining operations

Marathon recently released updates for August, where it reported its now has approximately 34,000 active miners producing close to 3.2 EH/s. Over the next three months the company projects it will have an additional 65,000 miners energized, meaning near the end of November or early December 2022. That will bring EH/s to 6.9.

Management announced its S19 XPs benefitted from a downward adjustment in price; they expect this to continue through the end of the year, which should at least mitigate costs and lower net losses. If the price of Bitcoin strengthens, this could meaningfully improve the performance of the company through the end of the year, and probably well into 2023.

The company maintains that it will have enough miners installed by the middle of fiscal 2023 to generate about 23 EH/s.

Marathon produced 184 Bitcoin in August, bringing Bitcoin holdings to 10,311, with a fair market value of $206.7 million. Approximately 66 percent of the hash rate of the company is expected to be generated by S19 XPs, which the company estimates will make them 30 percent more energy efficient, suggesting lower costs.

The point here is that even though upfront costs remain a short-term challenge, the company is taking the right steps to lower costs long term while building out its mining fleet and increasing its EH/s. If it reaches its goal of 23 EH/s in 2023, it is positioned very well for a rebound in the price of Bitcoin.

Why Marathon is holding Bitcoin

The strategy of continuing to hold its Bitcoins could be questioned in light of its rising costs and net losses, but for now I think this is the right thing to do.

Since Marathon has access to capital, it doesn't make sense to sell Bitcoin at very low prices, especially when, in my opinion, there is a much stronger chance it's going higher rather than lower. But if the price drops once again, I think the bears are starting to lose momentum, and any short-term downward move would only be temporary. And since Marathon has been among the best companies in regard to leveraging up in relationship to the price of Bitcoin, as seen in the chart below, I think the company is right in waiting to see where the price of Bitcoin heads over the next three to six months before taking any steps to raise capital via selling Bitcoin.

Price movement of Marathon Digital against bitcoin and its peers


Some have asked me why not keep it simple and buy Bitcoin directly? My answer is, you can make more money from Marathon because its share price, in the past, has outpaced the price of Bitcoin when the price turns bullish.

In reality, investors in this space should hold Bitcoin and Marathon.


Marathon is a highly volatile stock in a highly volatile sector. Investors have to understand that the share price of the company is going to take some wild swings, and when those swings are to the downside, it should be considered a buying opportunity.

As for concerns related to its balance sheet and net losses, it appears to me the company is mitigating those issues and should show solid improvement over the next year.

All things considered, when you invest in a Bitcoin mining company like Marathon, you're investing in the price of Bitcoin, as these types of companies are proxies for Bitcoin.

As mentioned above, a major reason I like Marathon is that it provides an opportunity for even better gains than Bitcoin when the price of Bitcoin turns bullish.

I don't see any reason Marathon shouldn't do very well over the next six months. That said, it's all dependent on where the price of Bitcoin goes from here. If for some reason it consolidates and/or falls for a sustainable period of time, then that thesis would change. Because of the volatility of Marathon, I would recommend dollar-cost averaging as the best way to take a position, unless we have another plunge in the price of Bitcoin and the share price of Marathon. Under those conditions it would be worth taking a larger position, as the potential rewards would be higher than the risks.

This article was written by

Gary Bourgeault profile picture
I am a former investment advisor and owner of several businesses. These days I invest only for myself while continuing to write on a variety of financial and economic topics.

Disclosure: I/we have a beneficial long position in the shares of MARA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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