The company’s focus on specifically mining Bitcoin (BTC-USD) has placed it on the map of many crypto enthusiasts and investors. Shares have increased more than 170% over the past twelve months. However, after having dipped 34% over the past month, a significant dip in share price, MARA stock continues to be a buy. Below are 3 reasons why.
Bitcoin continues to reach new heights
In 2023, Bitcoin appreciated 164%, outperforming traditional assets, such as gold. One reason for this surge was crypto investors betting on SEC approval for Bitcoin spot ETFs. In late November, the SEC handed down their decision to allow several spot bitcoin exchange-traded products. Since then, bitcoin has experienced a significant rally. In particular, the price of bitcoin has gone up more than 56% on a year-to-date perspective. Over a 12-month period, the price of the famed cryptocurrency has appreciated around 177%.
The proliferation of Bitcoin spot ETFs has certainly had a lot to do with the rally. As bitcoin continues to further institutionalize, the price could increase even higher, pushing up Marathon Digital’s share price in the process.
Interest rate cuts are still in play for 2H-2024
After U.S. inflation appeared stubborn in the first half of last year, the Consumer Price Index finally came down significantly by the fourth quarter. However, the first two months of 2024 have shown inflation has regained some ground. Inflation has risen, beating estimates, for both January and February, creating a headache for the U.S. Federal Reserve. If interest rates were to remain elevated for an extended period, many investors could lose their risk appetite for assets like crypto, especially when safer treasury bonds are offering high yields.
However, despite increase in CPI for the first two months of the year, I do believe this is more of an aberration rather than a new trend of elevated inflation. In other words, investors should expect rate cuts in the second half of 2024 and not in the first half. Rate cuts will ultimately help increase the risk appetite of investors and traders and sustain the rise in the bitcoin spot price. Marathon could greatly benefit here as a major minor of bitcoin.
MARA has made meaningful investments in mining
Last week, Marathon Digital announced it would be acquiring Applied Digital Corporation’s Bitcoin data center mining assets in Texas, and this particular transaction represents Marathon’s second major acquisition of Bitcoin-focused data centers over the past few months.
The acquisition would ultimately increase the amount of self-owned and operated megawatts in Marathon’s Bitcoin mining portfolio to 54%. Ultimately, Marathon will increase the number of megawatts in its mining portfolio to 1.1 gigawatts, 54% of which will reside on sites directly owned and operated by the Company.
This all translates to positive news for MARA stock. Bitcoin’s rise in popularity underscores why it is essential for mining companies like Marathon Digital to increase their asset base, and this most recent transaction shows MARA is planning for the long term.
On the date of publication, Tyrik Torres did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tyrik Torres has been studying and participating in financial markets since he was in college, and he has particular passion for helping people understand complex systems. His areas of expertise are semiconductor and enterprise software equities. He has work experience in both investing (public and private markets) and investment banking.