Marathon Digital: Buy The Dip Before The Next Bitcoin Halving (NASDAQ:MARA)

Marathon Digital Holdings (NASDAQ:MARA) is my favorite Bitcoin mining stock out of all other Bitcoin miners due to its massive Bitcoin stash, commitment to 100% carbon neutral mining, and sound leadership.

In my previous Marathon Digital article posted back in January 2022, I mentioned that investors could profit from the ongoing Bitcoin fear if they picked up MARA stock on the cheap.

I posted that article when MARA stock was just $18 and shares soared to as high as $30 at the top of the March 2022 tech stock cycle. That’s a solid 50%+ profit in just a few months if you took some action.

Now that Bitcoin has fallen in price, I believe it’s time to provide you with an updated outlook on Marathon Digital because a lot has occurred in the past few months.

We will discuss the latest Marathon Digital production numbers and discuss my future outlook over the next few months.

Marathon Bitcoin Revenue Update

Marathon Digital reported its full-year 2021 results back in March as the company moves forward with its aggressive bid to become the #1 North American Bitcoin mining producer.

2021 Bitcoin mining revenue increased to $150.5 million (Up 3,353% YoY) from $4.4 million in 2020. Q4 2021 revenue increased to $60.3 million (Up 2,180% YoY) from $2.6 million in Q4 2020.

Marathon Digital continued its meteoric rise in Q1 2022 and put up number quarterly numbers across the board in terms of revenue, mining production, and hash rate.

The company produced 1,258.6 BTC in Q1 2022 (Up 556% YoY) and increased hash rate 14% during the quarter. However, Marathon Digital trailed both Riot Blockchain (RIOT) and Core Scientific (CORZ) in terms of total Bitcoin mining output.

Company	Q1 2022 BTC Mining Production
Marathon Digital	1,258.6
Riot Blockchain	1,405
Core Scientific	3,201

Source: Author

As of March 30th, 2022, Marathon Digital deploys 36,380 miners at a hash rate of 3.9 EH/s. Total BTC holdings reached 9,373.6 with a current market value of $374 million.

The company remains on track to scale-out mining products in early 2023 with 199,000 miners deployed at a 23.3 EH/s by next year.

That’s over a 5x increase in total miners deployed so investors should take a look at a serious 5 to 10x return if things go as planned.

Marathon Digital Remains My Top Overall Bitcoin Mining Play

MARA stock looks extremely attractive near $20 support levels and I don’t believe there is a ton of risk right now.

Marathon Digital CEO Fred Thiel is a hardcore HODLer and currently has no plans to sell any of the Bitcoin mined by the company. He spoke about MARA stock being significantly undervalued at the 2022 Bitcoin Miami Conference and continues to build immense shareholder value over time.

Marathon holds more BTC than any other publicly traded miner and should hold on to its dominance with the deployment of nearly 200,000 mining machines by early 2023.

We are currently in the 2nd stage of the Bitcoin halving cycle so don’t expect massive gains just yet. I explained in my most recent Bitcoin article that 2022 could be a down year for BTC and other Bitcoin mining stocks.

The good news is Bitcoin could have a monster rally in 2023 so I believe this temporary weakness presents a strong buying opportunity.

Risk Factors

Competition is heating up in the Bitcoin mining space thanks to the China Bitcoin ban and mainstream adoption of crypto and blockchain technology.

Bitcoin mining companies must increase their mining output before the 5th halving cycle, which will cut the Bitcoin mining reward in half from 6.25 BTC to just 3.125 BTC in 2024.

Competitors like Riot Blockchain and Core Scientific are the other two publicly traded companies that mined more BTC than Marathon Digital in Q1 2022. However, Marathon Digital holds more BTC than both companies.

Company	Q1 2022 BTC Holdings
Marathon Digital	9,373.6
Core Scientific	8,497
Riot Blockchain	6,062

Source: Author

If Marathon Digital fails to increase its hash rate then these two competitors could steal a lot of institutional investor attention and Bitcoin mining rewards.

Another risk factor is future share dilution to fund the deployment of more miners in the future. Marathon Digital raised $747.5 million in an unsecured convertible note offering with a 1% coupon rate due in 2026.

Convertible notes allow investors to convert the outstanding debt into shares assuming the stock price trades at a much higher price around the maturation date.

With around 103 million shares outstanding, I fully expect the convertible notes to be transferred into shares if Bitcoin rallies much higher in price over the next 4 years. In my opinion, I think MARA stock could easily 10x from here if BTC soars in price, which would ease the blow of dilution.

Conclusion

Marathon Digital is one of the better ways to profit from the popular rise of cryptocurrencies such as Bitcoin around the world. If you don’t want to hold BTC outright, then consider investing in crypto mining companies as a wonderful hedge.

Blockchain technology will transform the entire global financial system over the next few years and Bitcoin should remain on top due to its 40% dominance over the crypto market.

Miners will accumulate massive BTC stashes and provide a ridiculous amount of intrinsic value if Bitcoin soars in price.

MARA stock looks attractive at these current price levels and I’m looking to build a position at the moment.