MARA Stock Is a Decent but Imperfect Bitcoin Price Proxy
Traders have different preferences, and not everybody wants to delve directly into Bitcoin investing. If you’d rather just stick to the stock market, Marathon Patent Group (NASDAQ:MARA) shares could be right up your alley. MARA stock trades as part of the Nasdaq composite, so at least you’d be transacting on a reputable exchange.
Interestingly, an argument can be made that Marathon is both big and small at the same time. At the moment, the company admits that it only operates a single cryptocurrency mining facility in Quebec, Canada. On the other hand, Marathon is relentlessly expanding its mining equipment collection.
Marathon CEO Merrick Okamoto even aspires to make his company “one of, if not the largest, Bitcoin miner in North America.” That’s awfully ambitious for a company that most stock traders probably haven’t even heard of. Should bitcoin enthusiasts consider a position in MARA stock, then?
A Closer Look at MARA Stock
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If you’re looking for evidence that MARA stock could serve as a fairly reliable replacement for Bitcoin, just check the price action. Remember how the Bitcoin price rocketed upwards during the final months of 2017? MARA shares essentially did the same thing.
To be more specific, MARA stock leaped from $5 and change to more than $23 during 2017’s fourth quarter. If you know what happened to the Bitcoin price after 2017, then you can probably guess MARA’s next move as well.
Unfortunately, in 2018 Bitcoin and MARA stock crashed in tandem. By the end of that year, MARA was trading below $2. Evidently, whatever’s bad for Bitcoin is also bad for the cryptocurrency mining business.
Yet, it might also be claimed that Bitcoin’s rise can lift the miners as well. Holders of Bitcoin enjoyed a long-awaited price surge this summer, and so did MARA stockholders. In an exhilarating move, MARA ascended from less than $1 in mid-July to $3.41 today.
More Miners, Please
In defense of Okamoto’s aforementioned suggestion that Marathon might become North America’s biggest Bitcoin miner, it must be conceded that the company has acquired a rather sizable collection of mining equipment.
It’s hard to keep track of all the purchases that Marathon has made recently, so I’ll provide a bulleted list for you now and you can thank me later:
May 11: Marathon announces the purchase of 700 M30S+ ASIC Miners from MicroBT. These are expected to “generate 56 PH/s (petahash) of hashing power.”
May 12: A day later, at a purchase price of $1,729,200, Marathon declares that it bought an additional 660 Bitmain S19 Pro Miners.
Next up, on May 19, the company revealed that it purchased an additional 500 Bitmain S19 Pro Miners.
Marathon finally took a breather from its spending spree, but that didn’t last long. On June 11, the company announced the purchase of 500 more Bitmain S19 Pro Miners for $1,190,000.
July 29: The company discloses that it bought 700 M31S+ ASIC Miners from MicroBT.
The Big Gamble
If you think that’s a lot of mining equipment, then the following development might shock you. On Aug. 14, Marathon revealed that it entered into a $23 million contract with Bitmain to purchase 10,500 Antminer S-19 Pro ASIC Miners.
That, then, is what prompted the company’s CEO to anticipate that Marathon could become North America’s largest Bitcoin miner. In defense of the massive $23 million expenditure, Okamoto asserted that it “locks in the purchase price, a substantial discount from the current retail price, and greatly reduces the risk of price increases to the Company and potential shortage of Miner availability in the future.”
So, there you have it. As small as the company is, Marathon could build a case that it is indeed North America’s biggest miner of Bitcoin. The ability to claim this title comes at a staggering cost, but Okamato’s argument that he’s locking in a favorable price could have merit to it.
Of course, none of this will help Marathon if the Bitcoin price crashes. If that happens, then both the company and the shareholders will suffer financial loss. Therefore, don’t even consider buying MARA stock unless you’re bullish, or at least neutral, on the Bitcoin price.
The Bottom Line
There’s a buying bender going on at the Marathon Patent Group headquarters, but that’s not necessarily a bad thing. In the final analysis, the MARA stock price will depend largely on Bitcoin’s direction.
It won’t be a perfect one-to-one correspondence, but cautiously using MARA stock in place of Bitcoin, or in addition to it, isn’t a terrible idea.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.