Donald Trump’s victory over Kamala Harris has significantly revived interest in the cryptocurrency sector today, but there is more to this Bitcoin miner’s story.
Marathon Digital (MARA 29.14%) is one of the leading Bitcoin miners (BTC 7.43%) in the world and definitely one I keep a close eye on. The price of this cryptocurrency mining rose well today, rising by 19% at the market close.
While the public narrative around cryptocurrencies has certainly changed over the past 24 hours thanks to Donald Trump’s victory in the 2024 presidential election, there is more to the story when it comes to why Marathon Digital shares are soaring today. The fact that we have a pro-crypto president in power is certainly bullish for the sector overall, and Trump’s previous comments about building up a strategic reserve of Bitcoin (as well as digital tokens confiscated from violators) help the Bitcoin (and by extension, Marathon Digital) argument. .
However, I will address two other key factors that I think Marathon Digital investors need to consider more closely now.
Hype is great, but the fundamentals are better
Unlike many cryptocurrency projects that are not valued based on profits and cash flows, companies like Marathon Digital that were created for the express purpose of mining Bitcoin, are actually fundamentally evaluated by investors and the market in general. Accordingly, the company’s operating metrics, which include Bitcoin mining production, are closely monitored by many in the industry.
Following the Bitcoin halving this year (as mining rewards were halved), Marathon’s stock price and valuation took a significant hit. However, today’s 19% rise in Marathon Digital suggests that some investors are bullish on the idea that rising Bitcoin prices could at least partially offset the decline in production. Additionally, the fact that the company just announced its highest Bitcoin production in the post-halving era is bullish for those anticipating higher Bitcoin prices and increased production.
Marathon Digital’s management team cited higher hashrate as the main reason the company was able to increase its production last quarter. The company’s hash rate reportedly rose more than 14% to more than 40 exahashes per second, with transaction fees also rising contributing to the company’s stronger-than-expected throughput.
These strong numbers, combined with improving Bitcoin price exceptions, appear to be driving major analyst upgrades for Marathon Digital ahead of its upcoming earnings report and Q3 results conference call on November 13. Assuming analysts are right on these revisions, or even that the company may beat these estimates, any kind of continued momentum in Bitcoin could lead to further price appreciation.
Is this all at a price?
Today’s action has certainly contributed to a great deal of potential future gains. Whether we’re talking about the company’s upcoming potential earnings based on its recent record post-halving Bitcoin production, or expectations for future Bitcoin price gains, today’s move is likely pricing in a lot of that positivity.
However, previous cryptocurrency rallies have taken on a life of their own. Calling this rally exaggerated, or suggesting that MARA stock is likely to head lower from today’s closing price due to profit-taking may be premature. There will certainly be a group of investors who want to stick with this name and ride this momentum higher or to a point where it looks like the ceiling has been reached. Again, I think it is too early to make a decision on this front.
In my view, Marathon Digital is one of those volatile stocks that is best viewed as a trading vehicle for the Bitcoin mining market. Wild valuation fluctuations for a company, based on a combination of factors that the company can control (i.e. hash rate and overall Bitcoin production) and factors outside of its control (i.e. Bitcoin prices) can lead to significant gains or losses in short time frames. Today’s action is good, but it is clear that this stock requires volatility momentum.
Chris McDonald has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
