Marathon Digital (MARA -15.27%) from a tiny patent company to the largest in the world Bitcoin (BTC -0.59%) Bergmann for the last six years. As of the end of 2023, the company had a fleet of 199,200 miners in use and held more than 15,000 BTC (worth $698 million at the time of this writing) on its own balance sheet.
Marathon stock has seen some wild swings since BTC miners first made a large purchase in early 2018. Bulls praised it as a great pure play on Bitcoin, while bears claimed its capital-intensive mining business was unsustainable. But in the last 12 months, Marathon stock has risen over 420%, while the price of BTC has risen about 170%. Could Marathon stock rise even further in the next 10 years as Bitcoin becomes a mainstream asset?
Image source: Getty Images.
The most important strategies of the marathon
Marathon plans to grow by continually expanding its fleet of BTC miners, leveraging its increasing size to reduce its energy costs, and regularly selling a portion of its own BTC to increase its liquidity. In other words, the entire business model is dependent on the price of BTC rising fast enough to offset the costs of mining the cryptocurrency.
As this chart shows, this balancing act failed as the price of BTC plummeted from its peak of $69,000 in November 2021 to $16,000 at the end of 2022. This decline coincided with rising energy prices and the net loss increased 19-fold in 2022.
|
Metric |
2020 |
2021 |
2022 |
2023 (forecast) |
|---|---|---|---|---|
|
revenue |
4 million dollars |
150 million dollars |
118 million dollars |
365 million dollars |
|
Net income (loss) |
($10 million) |
($36 million) |
($687 million) |
24 million dollars |
Data source: Marathon Digital.
However, analysts expect revenue to more than triple this year with a net profit as the price of BTC rises again. Three catalysts could drive BTC's rally: the stabilization of interest rates, which drives investors towards riskier assets such as cryptocurrencies; the Securities and Exchange Commission's (SEC) recent approvals of the first exchange-traded funds (ETFs) tied to the spot price of BTC; and the upcoming BTC “halving” this year, which will halve the rewards for BTC mining.
The best and worst case scenarios for Marathon
Marathon's growth over the next 10 years will mainly depend on the price of BTC. If Bitcoin is widely accepted as a mainstream asset and currency, is clearly regulated, and the next two four-year halvings (2028 and 2032) further reduce available supply, its price should rise significantly by 2035.
But the long-term predictions for the BTC price are omnipresent. According to Coin Price Forecast, its price could reach $240,000 by the end of 2035. Ark Invest's Cathie Wood recently predicted that its price would reach almost $1.5 million by 2030, while Fidelity boldly claimed that its price would reach $100 million by 2035 and $1 billion by 2038.
We should take all these estimates with a grain of salt. But with recent Bitcoin spot ETF approvals and stabilizing macroeconomic and regulatory headwinds, BTC's current price of around $46,000 could mark an imminent bottom, and growing market demand and declining supply could push the price into drive up.
The rising price of BTC would allow Marathon to accelerate the consolidation of the mining market. Last year it opened two new plants, established a mining joint venture in Abu Dhabi, United Arab Emirates and agreed to purchase several other mining sites. This expansion is expected to help achieve economies of scale and reduce mining costs. It could even acquire or merge with its smaller competitor Riot Platforms. If that happens, then Marathon still looks reasonably valued at 11 times next year's sales.
On the other hand, another bear market could turn the recent “crypto winter” into an ice age over the next decade. BTC may be better protected from this freeze than the smaller altcoins on the market, but it could lose so much value that it is no longer worth mining. If this ice age coincides with rising energy prices, Marathon's business could collapse.
Where will Marathon stock be in a decade?
I believe that the price of Bitcoin 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 will be in the millions, but it could potentially triple or quadruple its value and take Marathon stock to new highs. The ride will certainly be bumpy, but it could produce strong returns for patient investors.
Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
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