Is MARA Stock A Buy As Bitcoin Slumps?

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.

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.

Marathon Digital's Mining Power Grows
Marathon reported a 147% sequential increase in its Bitcoin production in December. It said its Bitcoin production in the month of December was a record 484.5 BTC, compared to just 196 BTC produced in November. The company's Bitcoin production in fiscal 2021 surged 846% year-over-year to 3,197 BTC. Marathon has a fleet of 32,350 active miners.

Marathon also said that it had received 42,381 top-tier ASIC miners from Bitmain in 2021, with another 3,285 ASIC miners in transit. 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.


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. At the beginning of the year, MARA stock was trading around 10. As Bitcoin surged, the stock reached a high of 57.75 on April 6, 2021.

Shares popped 15% on July 26, 2021, as the price of Bitcoin climbed back over $39,000, but gave back most of those gains on July 27, 2021. MARA stock is trading below its 50-day line, according to MarketSmith chart analysis.

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 have since 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 28 out of a best-possible 99 and a Composite Rating of 28.

An Accumulation/Distribution grade of B- indicates moderate buying by institutional investors.

Wall Street Interest
But Wall Street were keen to add MARA stock to their 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 had taken a 6.7% stake in the company in June. On Aug. 4, Fidelity had bought a 7.4% stake in Marathon Digital.