Marathon Digital: Buy This Bitcoin Mining Stock During Crypto Crash (NASDAQ:MARA)

After Bitcoin recently crashed, I decided to move some funds into my favorite crypto mining stock, Marathon Digital Holdings (NASDAQ: MARA).

Bitcoin recently sold off on fears of interest rate hikes after investors received July 2022 Fed minutes.

I am extremely bullish on Bitcoin and blockchain technology in the long run, and don’t mind buying MARA shares at a discount.

While most BTC miners have been selling their Bitcoins to keep the lights on, I was impressed by Marathon’s hard HODL strategy in the company’s latest Q2 quarterly report.

In this article, I will provide an in-depth update on Marathon Digital’s business and provide several reasons why I bought back into Marathon Digital stock.

Q2 Business Update

My MARA stock article talked a lot about why the 2024 Bitcoin Halving is such an important event. Now I want to shift gears and cover how Marathon is doing after reading their latest quarterly report for Q2 2022.

The company suffered a massive drop in Bitcoin production due to its Montana mining facility shutting down in July. A massive storm hit the town of Hardin, Montana on June 11, knocking 75% of Marathon’s miners offline. The company lost nearly 30,000 miners for several weeks, affecting total mining output in Q2 2022.

Q2 Bitcoin production was 707 BTC (Up 8% YoY) while Bitcoin’s price fell 57% in the same period. It was a tough quarter for all crypto stocks as Bitcoin plunged after the Terra Luna collapse.

Total revenues reached $24.9 million and the company recorded a net loss of $191.6 million (-$1.75 per share). Impairment charges of $207.3 million accounted for the bulk of Marathon’s losses due to falling Bitcoin prices.

The good news is that Marathon Digital had 10,127 BTC in its balance at the end of July 31, 2022 and broke the 10,000 BTC milestone for the first time ever.

Total installed miners reached 49,000 by the end of Q2, but the company maintains its goal of nearly 200,000 installed miners by early 2023.

Marathon Digital moved all of its miners from Hardin, Montana to North Texas after signing a 254 MW deal with Applied Blockchain (APLD).

In addition, the company continues to expect mining operations to be 100% carbon neutral by the end of 2022.

The company has $120.7 million in cash on its balance sheet as of Q2 2022.

Why I’m more bullish on Marathon Digital

After BlackRock signed an agreement with Coinbase (COIN) to buy Bitcoin for its clients, I knew that many institutional investors will finally accept Bitcoin as “real money” for the first time ever.

This event alone is a huge bullish indicator for crypto stocks because BlackRock wants to buy Bitcoin while prices are down.

Marathon Digital has more Bitcoin than any other North American crypto miner and has just moved its facilities from Hardin, Montana to North Texas and North Dakota.

BTC held by top publicly traded crypto miners

Click to enlarge

Source: Author, with data from company registrations

Texas is a crypto-friendly state that will help the company scale BTC production.

Whenever I invest in a new and emerging sector, I look for the best company that can scale and grow its revenue over time.

Marathon’s 10,127 BTC holdings have a current market cap of ~$212 million and could be useful if the company wants to sell some to scale operations.

The company used several different methods to raise cash during Q2, including a $161 million sale of common stock and a new $100 million loan.

Marathon is an asset-light company with about $14 million in quarterly capital expenditures and plans to spend about $150 million to $175 million to supply and deploy the remaining miners.

Risk factors

This is a dark period for crypto companies and Marathon may fall victim to several risk factors such as:

• Falling Bitcoin prices increasing depreciation expenses and delaying mining expansion.
• Issuance of more ordinary shares to finance operations, which will dilute the shareholders.
• Increased energy costs due to the war between Russia and Ukraine which will increase capital expenditure.
• Another potential storm or natural disaster halting mine production at either the North Texas or North Dakota facilities.

There is no guarantee that all listed crypto miners will survive until the next Bitcoin halving in 2024. Marathon has enough cash and Bitcoin on its balance sheet to stay in business.

The biggest risk in my opinion is falling Bitcoin prices which will send crypto investors running for the exits.

MARA stock traded as low as $6 in June 2022 and could trend lower if Bitcoin remains bearish.

I personally buy MARA stock when it drops below $15 or below $2 billion in market cap.

Conclusion

YOLO stocks have taken a beating lately, so now is the time to invest in crypto stocks. The best time to buy stock is when nobody wants to own it and I don’t think things can get much worse for the crypto industry.

There are dozens of listed crypto mining stocks right now, but most of them have terrible balance sheets or relatively small BTC holdings.

Marathon is the “Alpha” of the group with over 10,000 BTC and counting. That’s why I loaded up on MARA stocks during the recent market selloff and will add more as we head into next year.