Marathon Digital Ventures Into Large-Scale Corporate Bitcoin Purchases, Deviating From Traditional Mining Investment

In a bold move reminiscent of billionaire Michael Saylor's strategy, Marathon Digital has ventured into large-scale corporate purchases of Bitcoin (BTC)

Marathon Digital Technologies (NASDAQ:MARA) has ventured into large-scale corporate purchases of Bitcoin (BTC) using borrowed funds in a move reminiscent of billionaire Michael Saylor’s strategy, albeit deviating from the traditional mining investment.

This month, Marathon, known for its substantial mining operations, raised $300 million through the sale of convertible notes — a debt that can be converted into stock — and used the majority to purchase 4,144 bitcoins.

The strategy marks a significant shift from expanding mining operations to direct Bitcoin acquisition, highlighting the challenges within the mining sector this year. Marathon’s decision not to invest in new mining rigs is based on current profit returns from mining, or “hash price,” which they deem less beneficial compared to buying Bitcoin directly under the present conditions.

The approach follows a tumultuous period for Bitcoin which saw its price plummet in 2022, and heavy criticism of Saylor’s MicroStrategy (NASDAQ:MSTR) for its investment strategy. However, the criticism has since quieted down as MicroStrategy’s Bitcoin assets soared in value.

Both MicroStrategy and Marathon initially shared a similar trajectory in the stock market, reflecting Bitcoin's pricing. But this year, the two companies’ stock performances diverged drastically. MicroStrategy's stock has surged by 90%, while Marathon's stock has dropped by about 40% amid worsening conditions in the mining sector.

Bitcoin Mining Profits Down

The significant downturn in mining profitability is attributed to the halving event in April, which cut the reward for mining Bitcoin by half, further straining the industry already battling with increased competition and costs. Recent statements from financial analysts highlight an all-time low in mining profitability, compounded by rising network difficulty and hashrate.

In response to these challenges, Marathon has embraced a “full HODL” strategy, opting to keep all mined Bitcoin and purchase additional ones, increasing its holdings to over 25,000 bitcoins. This strategy is seen as a confidence measure in Bitcoin’s long-term value, advocating for its role as a prime reserve asset for corporations and governments.

The shift to using convertible notes for funding mirrors MicroStrategy’s method, enabling Marathon to manage capital costs effectively while minimizing shareholder dilution. This financial maneuver not only positions Marathon advantageously for potential acquisitions as the industry consolidates but also aligns with the growing institutional interest in direct Bitcoin exposure through newly launched exchange-traded funds, contrasting the dwindling allure of mining stocks.

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