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The recent surge in Bitcoin mining stocks can be attributed to improving macroeconomic conditions and Bitcoin’s surge, breaking the $48,000 threshold for the first time since April 2022. Despite concerns about a potential correction, I anticipate continued growth in the sector, particularly with the upcoming Bitcoin halving and impending presidential election.
In this context, Marathon Digital (NASDAQ: MARA) emerges as the premier Bitcoin proxy investment, boasting a substantial HODL stash that outstrips its competitors. This positions Marathon to capitalize more on Bitcoin’s price movements, a boon in bullish markets like the current one. With Bitcoin poised for new all-time highs post-halving, one should maintain a buy rating on Marathon.
Bitcoin Halving
The 4th Bitcoin halving event is slated for April 19, 2024, halving the block reward from 6.25 to 3.125 Bitcoin. Historically, such supply reductions have precipitated significant price fluctuations in the cryptocurrency, both leading up to and following the event.
In the first halving event on November 28, 2012, Bitcoin surged from $3 a year before $13 by the event date, culminating in a remarkable 33767% increase since the year preceding the halving.
Similar patterns persisted in subsequent halving events, with Bitcoin increasing by 141% leading up to the second halving on July 9, 2016, and by 18% before the third halving on May 11, 2020. After each halving, Bitcoin witnessed substantial appreciation, underscoring the significance of these events in its price dynamics.
The Impact of Halving on Leading Miners
While the halving event typically bodes well for Bitcoin’s price, its repercussions vary for miners. With block rewards halved, miners face heightened mining difficulty. Essentially, maintaining their mining power yields half the reward at the same cost. Thus, their viability hinges largely on Bitcoin’s post-halving price surge to offset decreased production. Consequently, unprofitable miners may struggle to sustain operations, underpinning my bullish stance on Marathon within the Bitcoin mining realm.
Presently, Marathon boasts a deployed hash rate of 26.7 EH/s, surpassing peers Riot (RIOT) and CleanSpark (CLSK), with hash rates of 12.4 and 10.09 EH/s, respectively, as per their January Bitcoin production updates. Anticipating a 30% increase in deployed hash rate this year, Marathon projects a rise to 34.7 EH/s by 2024’s end. Meanwhile, Riot forecasts hash rates of 20.1 EH/s in Q2, 24.4 EH/s in Q3, and 28.8 EH/s in Q4, with CleanSpark aiming for 20 EH/s by the first half of the year, recently exceeding 14 EH/s post-Sandersville expansion.
Despite short-term disruptions in January, Marathon mined 1084 Bitcoin at an operational hash rate of 19.3 EH/s, dwarfing Riot’s 520 and CleanSpark’s 577 Bitcoin production figures.
Considering Marathon’s projected hash rate increase and its rivals’ trajectories, Bitcoin miners’ hash rates could evolve as shown below:
| Bitcoin Miner | Q1 | Q2 | Q3 | Q4 |
|—————|—-|—-|—-|—-|
| Marathon | XX | XX | XX | XX |
| Riot | XX | 20.1 | 24.4 | 28.8 |
| CleanSpark | 14+ | 14+ | 14+ | 14+ |
Correlation of Bitcoin Price with Stock Market
Bitcoin’s price trajectory has closely mirrored that of the SPY since 2018, albeit with higher volatility. Given this parallel movement, especially evident in Marathon’s case, the outlook for Bitcoin miners appears increasingly bullish. Amid SPY’s strong performance, marking 10 new all-time highs this year after a robust 2023, investor optimism prevails. Expectations of a Fed pivot, bolstered by progress on the inflation front, could prompt rate cuts, further buoying market sentiments.
Marathon’s Unique Advantages in the Bitcoin Mining Space
In the realm of Bitcoin mining investments, Marathon stands out as a superior choice compared to its competitors, offering compelling reasons for investors to consider.
Firstly, Marathon’s substantial HODL stash sets it apart. With holdings of 15,741 Bitcoin, valued at over $820.6 million as of February 18, Marathon boasts the largest HODL stash among public Bitcoin miners. In contrast, its closest competitors, Riot (RIOT) and CleanSpark (CLSK) hold 7,648 and 3,573 Bitcoin respectively, translating to $398.7 million and $186.2 million, respectively. Consequently, any price uptick in Bitcoin significantly enhances Marathon’s value relative to its peers.
Additionally, Marathon’s impressive hashrate, as elaborated earlier, and its post-halving Bitcoin production impact confer another advantage. With its higher hashrate, Marathon is better positioned to navigate post-halving operations, efficiently solving more blocks and accruing more Bitcoin.
Furthermore, Marathon’s robust cash position underscores its strength. Presently holding $318.9 million in cash, as per its January update, Marathon surpasses Riot’s $290.1 million and CleanSpark’s $172.7 million. Factoring in each company’s HODL stash, Marathon boasts over $1.1 billion in liquidity, dwarfing Riot’s $688.8 million and CleanSpark’s $234.7 million. This affords Marathon greater flexibility to pursue growth avenues, including strategic acquisitions of struggling miners post-halving or expanding its mining infrastructure.
Conclusion
As Bitcoin’s price is poised for growth fueled by the upcoming halving event, Federal Reserve rate cuts, and the presidential election, Marathon emerges as the premier Bitcoin miner to capitalize on these catalysts. With its industry-leading Bitcoin stash, formidable hashrate, and substantial cash reserves, Marathon is primed to not only benefit from Bitcoin price appreciation but also thrive amidst increased mining difficulty post-halving. Therefore, I rate Marathon as a buy, confident in its potential to deliver substantial returns for investors.
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