Beth had previously discussed the I/O Fund's interest in Marathon Digital Holdings (MARA) in this forum post. Below, I expand on MARA and the key drivers that correlate the company to Bitcoin's price.
MARA – a play on Bitcoin.
There are a few different BTC miner stocks on the market, and one of the top performers recently has been Marathon Digital, MARA. MARA has gone all-in on owning BTC miners, and has invested its capital into buying the most efficient bitcoin miners (S19 Pro), rather than investing in infrastructure to host these miners.
The company primarily buys BTC miners, and pays hosting fees to 3rd party infrastructure providers who store and power the miners on MARA’s behalf. The benefit of this approach is that the company can focus and invest its capital into BTC miners rather than invest in infrastructure.
In early 2020, MARA ordered 10,500 S-19 Pro miners from Bitmain, which are some of the most efficient bitcoin miners on the market. MARA then ordered another 90,000 S19 miners from Bitmain later in 2020, which was Bitmain’s largest order ever.
If all of MARA’s BTC miners were deployed today, then MARA would account for 11% of bitcoin’s global hash rate, yielding 87 BTC/day. At $60,000/BTC that’s $162m in sales per month, or $1.9 billion in sales per year. The significance of MARA’s mining capabilities leverages the company to changes in bitcoin’s price. The more bitcoin goes up in price, the more MARA will make from mining it.
MARA will have all of its bitcoin miners deployed and installed by Summer of 2022. Note – bitcoin’s global hash rate will likely increase from now until summer 2022 so MARA’s daily BTC production may not reach 87 BTC/day. However, this could be offset by a continued rise in bitcoin’s price.
Another driver of returns for MARA is its “HODLing” strategy, or long-term holding BTC strategy. The company owned ~7,035 BTC as of 10/01/202, which was valued at $436 million. The company intends to hold more of the BTC that it mines going forward, which will further increase the company’s correlation to the price of Bitcoin.
Going forward, the two main driver’s that will increase the company’s valuation is the price of bitcoin and the company’s hash rate. If bitcoin’s price continues to rise and MARA’s production capacity remains near ~10% of global hash rate, then company will earn outsized returns. MARA estimates that its ROI on S-19 Pro bitcoin miners is close to 109% annually(@ a constant $30,000 BTC price). If BTC remains near $60k, then the ROI will likely double.
Disclosure: Bradley Cipriano and the I/O Fund may own shares in Marathon Digital Holdings and may change their respective positions within the next 72 hours. You can access the I/O Fund’s positions herehere. The above article expresses the opinions of the author, and the author did not receive compensation from any of the discussed companies