Is MARA a Safe Way to Get Exposure to the Bitcoin Rally?

Key Points

• Shares of MARA stock are correlating with the post-election surge in Bitcoin.
• A crypto-friendly administration aligns with the scarcity argument for Bitcoin and explains why investors are holding onto their BTC.
• MARA stock is down 5% since missing on the top and bottom lines, leaving investors to wonder if this is a buyable dip. 

Bitcoin (BTC) is up about 25% since the presidential election on November 7. The headline stories will focus on the fact that BTC is hitting new all-time highs on a regular basis. However, it’s important to note that Bitcoin’s new highs are also inflation-adjusted highs.  

If you’re an owner (or hodler), this rally feels like the vindication you’ve been waiting for. And if you’re a skeptic, it may be worth more than a passing glance. 

The reality is somewhere in between. But price action like this is even moving conservative investors to consider getting some exposure to Bitcoin. However, much like gold, there are different ways to get involved with Bitcoin that don’t involve buying fractional Bitcoin or investing in Bitcoin ETFs. 

I’m talking about Bitcoin miners. They’re rallying hard in correlation with Bitcoin and one of the names to watch is MARA Holdings Inc. NASDAQ: MARA, the company formerly known as Marathon Digital Holdings. MARA stock is up 26% in the week heading into its earnings report, which makes it one of the best business services stocks. But before you dive into MARA stock, it’s important to understand what’s happening with Bitcoin and how that’s related to the spike in the company’s stock.  

Why Bitcoin is Surging is As Important as the How Far 

Many investors are asking how high Bitcoin will go. Many believe that $100,000 by the end of the year is reasonable. A case is being made that BTC could rally to $120,000 before a meaningful correction occurs.  

But why is it rallying so hard? The former president and now president-elect has made it clear that his administration will be more friendly to cryptocurrency. This includes talk of a Bitcoin reserve, similar to the strategic petroleum reserve. In fact, since that announcement, there have been rumblings that other countries are making moves to establish their own strategic reserves of Bitcoin. 

This reinforces the scarcity of Bitcoin. The supply of Bitcoin is capped at 21 million, and as of this writing, there are approximately 19.7 million BTC in circulation. However, because of the way the cryptocurrency is mined, the last Bitcoin isn’t projected to be mined until 2139.  

That leads to another bullish point. This rally is amplifying the idea that once buyers own Bitcoin, they’re not selling. No matter how you feel about Bitcoin, the laws of supply and demand still apply, and it appears we’re entering a time where it will take a much higher price to separate owners from their Bitcoin.  

Coincidence or Something More? 

Undoubtedly the spike in MARA stock correlates with the rise in Bitcoin. However, that hasn’t always been the case. Much like gold and gold mining stocks there isn’t always a direct correlation between direct investment in BTC and BTC mining stocks.  

However, when you consider the reasons why mining stocks thrive, you can better understand the reason that MARA stock is ripping higher. Specifically, MARA announced the acquisition of two data centers in Ohio as well as its development of a 150-megawatt greenfield facility in the state.  

This will expand the company’s capacity to mine Bitcoin and allow it to do so more cost-effectively. MARA’s stated goal is to dominate the Bitcoin mining industry in those two areas. 

MARA Stock Drops 5%, Should You Buy the Dip 

MARA stock dropped 5% in after-hours trading. This came after the company delivered its third-quarter earnings report. The company missed on both its top and bottom lines after the market closed on November 12.  

Negative earnings per share of 42 cents were a greater loss than the negative 38 cents expected. Revenue of $131.6 million was lighter than the $140.2 million expected. However, revenue was up 35% year over year. The company also increased the amount of Bitcoin on its balance sheet by 45% during the quarter. MARA now holds 26,747 Bitcoin.  

Considering that the after-hours dip is coming at a time when BTC is posting a 24-hour gain (albeit a small one), is this the beginning of a decoupling between the miner and the underlying asset?  

A better answer may come by looking at the short interest in MARA stock. Although it’s down 9.2% in the last month, over 23% of the stock’s float is being shorted. Still, there are over 25,000 call options on MARA at a strike price of $30, set to expire on January 17, 2025. That’s just a few days before the Trump administration will be inaugurated.  

In the short term, MARA is likely to be a better trade than an investment. However, unlike Bitcoin, you do have fundamentals to evaluate.