Key Takeaways:
- Mining veteran Marathon Digital Holdings closed the fourth quarter of 2021 with gains, despite its stock MARA declining alongside Bitcoin.
- Business services company MicroStrategy (MSTR), aslo heavily dependent on BTC, was not considered a prime investment candidate by Nasdaq.
YEREVAN (CoinChapter.com) – Bitcoin mining company Marathon Digital Holdings (MARA) and business intelligence firm MicroStrategy (MSTR) take leading positions in the Technology Stocks sector through their affiliation with cryptocurrencies. Thus, traders could consider their stocks attractive investment opportunities for day trading and long-term investors.
However, there are several important factors to consider before a possible purchase.
Marathon Digital Holdings and Bitcoin volatility
Marathon Digital was launched in 2010. However, its stock MARA began trading in 2013 and has been susceptible to Bitcoin volatility ever since. In short, Marathon provides computing power for miners, and, in return, they pay the company in Bitcoin, which the company can choose to sell for revenue.
The MARA daily chart below (black graph) illustrates its correlation with the alpha crypto (blue graph). Moreover, Marathon stock traded at $25.50 on March 10, after the severe volatility threw MARA off its all-time high of nearly 83.50 in November 2021.
However, statistics show that stocks of mining pioneers such as Marathon Digital can outperform Bitcoin. While BTC gained roughly 345% in value since Feb. 2020, MARA scored an advance north of 2,300%. Moreover, the number of Bitcoin mined in February soared approximately 700% year-over-year, with an 8% higher hash rate.
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Marathon’s Q4 2021 report also reflected substantial gains. The company’s revenue soared 2,180%, going from $2.6 million in Q4 2020 to $60.3 million a year later. Moreover, Marathon Digital boosted the self-mined Bitcoin number to 360.3, a 729% year-over-year gain.
What to expect from Marathon’s MARA?
The quarter report also contained cash runway statistics to help potential investors make an informed decision. In short, a cash runway is a period it would take a company to run out of money if the spending continues at its current rate of cash burn.
In September 2021, Marathon Digital reported $242 million in cash and no debt. Notably, with a cash burn of $338 million over the trailing twelve months, it would take the company nine months to go bankrupt. However, analysts predict that the mining veteran will break even before the cash runway is out.
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Moreover, Marathon raised over $747 million in a convertible note offering, with a coupon rate of 1%, and scored another $100 million from Silvergate Bank, backed by Bitcoin and cash holdings.
Meanwhile MicroStrategy…
…is not directly involved in the cryptocurrency sector. Instead, the company provides business intelligence, mobile software, and cloud-based services. However, MicroStrategy CEO Michael Saylor is an outspoken crypto proponent and has a history of purchasing Bitcoin while it’s bottoming out.
The company has been investing in the flagship cryptocurrency since Aug. 2020. As of Feb. 1, 2022, its BTC treasury held north of 125,000 coins, acquired for approximately $3.8 billion. Furthermore, Mr. Saylor commented last month that he plans on obtaining more BTC, despite the market decline and a call by U.S. securities regulators to revise its disclosure in future filings.
Also read: MicroStrategy comes back for more Bitcoin—MSTR drops 5.40%.
However, the BTC purchasing pace in Q4 didn’t favor the company’s stock, as MicroStrategy reported a net loss of $90 million or $8.43 a share in the fourth quarter, missing consensus estimates for a profit of 89 cents a share.
On March 10, the MSTR stock traded nearly $437 for a share, after a 50% decline since Bitcoin’s all-time high in November 2021.
Also read: Bankruptcy risks cloud MicroStrategy as it announces another Bitcoin purchase.
Moreover, Nasdaq called MSTR the “bear of the day,” citing minor improvement expectations for the year ahead. Fears of bankruptcy in case of another Bitcoin price avalanche fuelled the bearish outlook.
In detail, the company reported $83.5 million in cash on hand. Thus, it cannot afford to “eat the losses,” considering that half of its market cap comprises the Bitcoin holdings. Should the crypto market crash further in 2022, MicroStrategy could follow suit, taking its investors along for the fall.
Furthermore, in Aug. 2021 found that MicroStrategy used only $500 million of its funds and $1.7 billion of debt financing.
