Is MARA Stock A Buy As Bitcoin Production Surges? Here's What Marathon Digital Stock Chart Shows

Cryptocurrency miner Marathon Digital Holdings (MARA) has been volatile as the price of Bitcoin fluctuates wildly. Here is what the fundamentals and technical analysis say about buying MARA stock now.

Marathon is a digital asset technology company that mines cryptocurrencies, focusing on the blockchain ecosystem and the generation of digital assets.

The company started out in 2010 as Marathon Patent Group, when it began collecting patents related to encryption. MARA stock began trading in 2013. On March 1, 2021, the company changed its name to Marathon Digital Holdings. On April 26, 2021, Fred Thiel replaced Merrick Okamoto as CEO. The company announced Dec. 15 that Okamoto was stepping down as chairman at the end of 2021. Thiel will become chairman on Jan. 1, 2022.

Marathon Digital provides the computing power needed to mine Bitcoins. Bitcoin mining consists of processing, or validating, transactions. The speed at which a digital currency miner processes transactions is called hash rate. The faster a miner can process transactions, the more revenue it generates.

Marathon Digital is paid in Bitcoin for mining. The company can then sell this Bitcoin to generate revenue. Marathon Digital also funds its operations through financing.

Marathon Digital's Mining Power Grows
On Feb. 4, Marathon reported an 816% year-over-year surge in Bitcoin production in January. MARA stock popped nearly 10% on the report. It produced 462.1 self-mined Bitcoin in January 2022 vs. 50.4 in January 2021. However, January's total is a sequential decline from December 2021's 484.5 BTC.

January's numbers brings Marathon's total Bitcoin holdings to 8,595 BTC, with a fair market value of $330.6 million.

Marathon reported $189.1 million in cash on hand. Total liquidity, defined as cash and Bitcoin holdings, was around $519.7 million.

Marathon received about 21,000 top-tier ASIC miners from Bitmain in January. Its existing mining fleet consists of 32,710 active miners producing approximately 3.6 EH/s (exahash-per-second, a speed rate).

The company expects to have about 133,000 operational miners by mid-2022.

Nevertheless, B. Riley analyst Lucas Pipes slashed price targets for crypto miners Marathon Digital, Riot Blockchain (RIOT), Greenidge Generation (GREE) and Stronghold Digital Mining (SDIG) due to higher-than-expected capital costs, he said in a note to clients.

Crypto Regulations Coming
The Biden administration is preparing to release a government-wide strategy to regulate cryptocurrencies as early as February, according to a recent Bloomberg report.

The National Security Council will task federal agencies to assess crypto's risks and opportunities. The plan will ask various agencies to submit reports in the second half of 2022. Last fall, the Biden administration proposed that only banks be allowed to issue stablecoins.

SEC Investigation
Marathon Digital stock tumbled 27% on Nov. 15, 2021, after it said in a filing that it had received a subpoena from the Securities & Exchange Commission. The SEC is asking the company and certain executives to produce documents and communications concerning the Hardin, Mont., data center facility.

"We understand that the SEC may be investigating whether or not there may have been any violations of the federal securities law," the company said in the filing. "We are cooperating with the SEC."

On Oct. 6, 2020, Marathon Digital entered into a series of agreements with multiple parties to design and build the Hardin data center. As part of the deal, it issued 6 million of restricted Marathon common shares as part of the deal.

Marathon Digital also said on Nov. 15 that it intends to raise $500 million in senior convertible notes to buy more Bitcoin and Bitcoin miners.

MARA Stock Technical Analysis
Marathon Digital was forming a bearish head-and-shoulders pattern in early April. But the stock went south from there, and no new pattern has formed.

MARA shares are closely tied to Bitcoin prices, so they have been on a wild ride. MARA stock hit a 52-week high of 83.45 on Nov. 9, 2021. But shares are now trading below their slumping 50-day line, according to MarketSmith chart analysis. The price of Bitcoin sank to a six-month low on Jan. 24.

Shares fell as much as 5.5% on June 21, 2021, as Bitcoin's value dropped to below $33,000 amid an intensifying Chinese crackdown on Bitcoin mining. On Sept. 24, 2021, China banned all cryptocurrency transactions. The move sent the value of Bitcoin down $2,000.

Meanwhile, the Biden administration on July 15, 2021, said it formed a task force to crack down on the use of cryptocurrency in ransomware attacks. Its effort will focus on tracing proceeds paid to hackers.

But the launch of a Bitcoin futures ETF and the prospect of others to follow fueled the crypto's race to a fresh high on Oct. 20, 2021, to above $66,000.

MARA stock popped 19% to an all-time high of 75.96 on Nov. 8, 2021, as the price of Bitcoin surged 6.8% vs. 24 hours prior, to $84,107. However, Bitcoin prices then dropped more than 30% to $58,635 on Jan. 4, 2022.

MARA stock's relative strength line fell sharply with the stock's 27% fall on Nov. 15, 2021. Marathon Digital has an RS Rating of 17 out of a best-possible 99 and a Composite Rating of 28.

An Accumulation/Distribution grade of B+ indicates strong buying by institutional investors.

Wall Street Interest
But Wall Street was keen to add MARA stock to holdings in 2021. A bunch of Bitcoin ETFs hit the market last year. On Oct. 19, 2021, ProShares Bitcoin Strategy ETF (BITO) began trading on the NYSE, while Valkyrie Bitcoin Strategy ETF (BTF) started trading Oct. 22, 2021.

The SEC also approved on Oct. 5, 2021, the Volt Crypto Industry Revolution and Tech ETF, in which MARA stock is expected to be among the holdings.

According to ETF.com, BlackRock's iShares Russell 2000 ETF (IWM) is the top holder of MARA, with 2.14 million shares. Meanwhile, BlackRock's iShares Russell 2000 Value ETF (IWN) ranks as the third top holder of MARA stock.

On Aug. 20, 2021, BlackRock (BLK), the world's largest asset manager, said it had taken a 6.7% stake in the company in June. On Aug. 4, Fidelity had bought a 7.4% stake in Marathon Digital.

Fidelity will spread the shares of the mining firm across four index funds: Fidelity Extended Market Index Fund (FSMAX), Fidelity Nasdaq Composite Index Fund (FNCFX), Fidelity Total Market Index Fund (FSKAX) and Fidelity Series Total Market Index Fund (FCFMX).

MARA Stock Fundamental Analysis
Marathon Digital reported better-than-expected Q3 earnings. It posted EPS of 85 cents, beating estimates of 48 cents, and swinging from a loss of 6 cents a share in the year-earlier quarter. Marathon Digital posted revenue of $51.71 million for the quarter ended September 2021, missing estimates by 31%.

Marathon holds 8,595 BTC, with a fair market value of $330.6 million as of Feb. 4.

With losses still piling up, MARA stock has the lowest possible EPS Rating of 1 out of a possible 99.

Is MARA Stock A Buy Now?
The volatility of MARA stock, largely due to its link to Bitcoin, makes it a risky investment. On May 20, 2021, news that the Biden administration could start requiring transactions above $10,000 to be reported to the IRS sent the value of Bitcoin and other crypto currencies down.

Meanwhile, on May 24, 2021, Marathon Digital Executive Chairman Merrick Okamoto said in a tweet he had met with other Bitcoin mining executives the previous weekend. The group, which included Tesla (TSLA) CEO Elon Musk and MicroStrategy (MSTR) CEO Michael Saylor, formed a Bitcoin Mining Council to promote energy usage transparency and accelerate sustainability initiatives.

Marathon Digital also has no track record yet of strong, consistent earnings and revenue growth.

Bottom line: Marathon Digital is not a buy as it has not formed any discernible pattern. Investors could have considered jumping in as it appeared to break a trendline with 44.97 as a resistance area, before it took off and became extended. But the stock plunged 27% on Nov. 15, after it reported an SEC probe into the company. Still, investors should keep an eye on MARA stock, as it has amassed an impressive arsenal of computing power.