Marathon Digital (MARA 4.42%) transformed from a tiny patent holding company into the world's largest Bitcoin (BTC +0.03%) miner over the past six years. By the end of 2023, it had deployed a fleet of 199,200 miners, and it was holding more than 15,000 BTC (worth $698 million as of this writing) on its own balance sheet.
Marathon's stock has gone through some wild swings since its first big purchase of BTC miners in early 2018. The bulls praised it as a great pure play on Bitcoin, while the bears claimed its capital-intensive mining business was unsustainable. But over the past 12 months, Marathon's stock has rallied over 420% as BTC's price rose roughly 170%. Could Marathon's stock soar even higher over the next 10 years as Bitcoin becomes a mainstream asset?
Image source: Getty Images.
Marathon's main strategies
Marathon plans to grow by continuously expanding its fleet of BTC miners, leveraging its increasing scale to reduce its energy costs, and periodically selling some of its own BTC to boost its liquidity. In other words, its entire business model is dependent on the price of BTC rising rapidly enough to offset the costs of mining the cryptocurrency.
As this table illustrates, that balancing act failed when BTC's price plunged from its peak of $69,000 in November 2021 to $16,000 at the end of 2022. That decline coincided with soaring energy prices, and its net loss widened by 19x in 2022.
|
Metric |
2020 |
2021 |
2022 |
2023 (Forecast) |
|---|---|---|---|---|
|
Revenue |
$4 million |
$150 million |
$118 million |
$365 million |
|
Net Income (Loss) |
($10 million) |
($36 million) |
($687 million) |
$24 million |
Data source: Marathon Digital.
However, analysts expect its revenue to more than triple this year with a net profit as BTC's price rises again. Three catalysts could fuel BTC's rally: the stabilization of interest rates, which are driving investors toward riskier assets like cryptocurrencies; the Securities and Exchange Commission's (SEC) recent approvals of the first exchange-traded funds (ETFs) tethered to BTC's spot price; and the upcoming "halving" of BTC this year, which will cut the rewards for mining BTC in half.
The best and worst case scenarios for Marathon
Marathon's growth over the next 10 years will be mainly dependent on BTC's price. If Bitcoin is widely accepted as a mainstream asset and currency, it's clearly regulated, and the next two four-year halvings (in 2028 and 2032) further reduce its available supply, its price should rise significantly by 2035.
Yet the long-term forecasts for BTC's price are all over the map. According to Coin Price Forecast, its price might reach $240,000 by the end of 2035. Ark Invest's Cathie Wood recently predicted its price would reach nearly $1.5 million by 2030, while Fidelity boldly claimed its price would hit $100 million by 2035 and $1 billion by 2038.
We should take all of those estimates with a grain of salt. But with the recent approvals of Bitcoin's spot ETFs and the stabilization of the macroeconomic and regulatory headwinds, BTC's current price of about $46,000 might mark a near-term bottom, and the market's growing demand and declining supply could drive its price higher.
NASDAQ: MARA
Key Data Points
BTC's rising price would enable Marathon to accelerate its consolidation of the mining market. Over the past year, it opened two new plants, launched a mining joint venture in Abu Dhabi, United Arab Emirates, and agreed to buy several other mining sites. That expansion should help it achieve economies of scale and reduce its mining costs. It might even acquire or merge with its smaller competitor Riot Platforms. If that happens, then Marathon still seems reasonably valued at 11 times next year's sales.
But on the other hand, another bear market could still turn the recent "crypto winter" into an ice age over the next decade. BTC might be better insulated from that deep freeze than the market's smaller altcoins, but it could shed so much value that it won't be worth mining. If that ice age coincides with soaring energy prices, Marathon's business could crumble.
Where will Marathon's stock be in a decade?
I believe Bitcoin's price will stabilize and rise over the next 10 years as it becomes a mainstream asset along with gold and other precious metals. I don't think it's going to the millions, but it could potentially triple or quadruple in value and lift Marathon's stock to fresh highs. The ride will certainly be bumpy, but it could generate big returns for patient investors.
