Marathon Digital Holdings (NASDAQ: MARA) stock is up 29%. MARA stock rose because Grayscale Bitcoin Trust won its case against the SEC. That does seem like a bit of a tenuous connection, we agree, but we also assure you that it’s true. Grayscale wanted to convert to being a spot bitcoin ETF (from a closed fund). The court agree that they could, the SEC’s refusal to allow them to do so was not reasonable. The effect of that was to add 6% to the bitcoin price. It’s that which then bumped the Marathon Digital stock price up.
As we’ve said before about Marathon Digital: “MARA stock is down because Bitcoin, BTC, is down. That’s just how mining works, the miner is geared to the price of what is being mined. This is true of physical mining just as it is of crypto mining. The price of lithium, or BTC, Litecoin, is whatever it is. The production of the one mine is much the same as that of any other, there are many miners of all of them. Miners are, therefore, price takers - they get simply the market price for their production. If that changes then so do their revenues - simple enough. But their costs - in crypto, their energy costs more than anything - don’t change in line with the market price. Thus changes in BTC feed directly through to the bottom line of Bitcoin miners. Great on the upside, not so much on the down. Marathon Digital is a bitcoin miner, the bitcoin price is down, so therefore so are MARA revenues and as costs haven’t declined in line then so too are likely gross margins and then net earnings. This is amplified by Marathon having a substantial stock of BTC that it has mined - that asset has also therefore decline in value. The balance sheet takes a hit as well as the P&L.”
That’s just the way it works, upside as well as down.
Marathon Digital Holdings stock price from Google Finance
We’ve seen this before at Marathon: “The background here is that Blackrock has flied to run a spot BTC ETF. Given that it's Blackrock making the filing we'd expect to gain a definitive answer out of the SEC as to whether this is going to be possible. Unlike smaller - or crypto only - applications the SEC can't just stall this, politically at least they're going to have to give an answer. The assumption being made is that if - for there is still risk here - the application is granted then this is a validation of the Bitcoin market overall, indeed of crypto, and so the price should rise.” MARA rose just because Blackrock filed with the SEC. The Grayscale victory is more of an impact than that. But same result - Marathon stock rises.
