Marathon Digital Holdings, Inc: Slow And Steady Wins The Race

Key Points

• Marathon Digital is in a new uptrend and it might gain momentum. 
• The rise in Bitcoin prices is helping to lift the stock. 
• Crypto winter will weigh on share prices, but this company is in a position to profit when BTC prices recover. 

If you wonder why Marathon Digital Holdings (NASDAQ: MARA) is trending higher in the first weeks of the new year, it is because of Bitcoin (CRYPTO: BTC) prices. The uptrend in Marathon Digital began on December 28, 2022, and coincided with the latest bottom in Bitcoin. This correlation is to be expected, Marathon Digital is a Bitcoin miner, but it doesn’t explain why Marathon Digital gained 20% on 2 separate occasions. That is due to the dwindling fear of fallout from the FTC scandal and some positive commentary from the analysts. 

Oddly, the commentary was about Coinbase Global (NASDAQ: COIN), not Marathon Digital. Analyst Trevor Willams at Jefferies initiated the stock at Hold, stating it should emerge from the crypto-winter in better shape than before.

Among the many factors in play is the company’s “front-footed approach to regulatory compliance,” which is a factor that will separate the winners and the losers in the cryptocurrency game (cough cough FTC). While not a ringing endorsement of Marathon Global or Coinbase, for that matter, it does assume Bitcoin will recover as will the cryptocurrency market and that is good news for the miners. 

The Analysts See Upside For Marathon Digital

The analysts, for the most part, see an upside for Marathon Digital, but the trend in sentiment is decidedly downward. The Marketbeat.com consensus rating is a firm Hold, but this is down from a Firm Buy, and the price target is also trending lower. The consensus price target of $14.22 assumes a good 185% of upside is available for investors, but the most recent targets are much lower than that.

Jefferies, in a different statement issued on the same day as the Coinbase coverage, lowered Marathon Digital to a Hold with a target of $4. That target implies a 20% downside, which may not be the last. 

Analyst Jonathon Peterson says there is no end in sight to the crypto winter and that, along with elevated electrical costs and the chances for electrical disruptions over the winter are hurting profitability. While the company is trying to expand and introduce new mining equipment those plans are also seeing delays that are cutting into the outlook. 

Competition For BTC Is At A Record High 

Competition for Bitcoins, as measured by the hashrate or total computing power focused on Bitcoin mining, is at an all-time high. This is contrary to the coin's massive price drop, and the hash rate can only be expected to get larger as the number of Bitcoins available to mine dwindles.

As it is now, there are less than 2 million BTCs left to mine before the coin is mined out. That shouldn’t happen until about 2140 because of regular halvenings. The halvening is when the BTC reward for miners is cut in half, an event that is intended to support BTC inflation as well as prolong the lifespan of the mining network.

However, Marathon Digital was able to increase its own output by 29% in 2022, so it appears well-positioned to compete in the market. 

The Technical Outlook: Marathon Digital Hits A Bottom 

The price action in Marathon Digital hit bottom and is moving higher because of Bitcoin, but its price might stay higher because of the volume. The market volume picked up significantly for this stock at the start of the New Year, which may propel the higher price.

Now that price is above the short-term EMA, the action may gain momentum and accelerate. The next target for resistance is near $6, a move above that could go to the $8 level.