Summary (TLDR)

Marathon Digital Holdings INC ($MARA) is likely to drop significantly in the coming months due to:

Cryptocurrency curves flattening out
A disproportionate relationship with Bitcoin's price movement (magnitude)
A mediocre business plan that new competing firms will easily beat
Poor financials: despite the booming industry, MARA netted a loss of millions of dollars for every quarter in 2020

Background

No one has enjoyed COVID-19 more than cryptocurrencies. After Bitcoin's 41.5% drop on March 13, 2020, the price grew over 1000% in a year. The magnitude of this crypto jump is surprising, but the sentiment isn't. Amidst a contentious U.S. election, an unprecedented pandemic, and a growing distrust for national banks – cryptocurrency was a safe place to turn to.

Overview

Publicly listed mining companies like RIOT, CAN, and MARA have followed Bitcoin's growth quite closely. As new investors uninterested in purchasing crypto directly join with investors who believe that mining companies will be more profitable than the coin itself, demand increases.

Cryptocurrency is here to stay. Although crypto will probably relapse as the pandemic ceases, it's unlikely that BTC will return to its sub-10k price range. But the same cannot be said for MARA.

Analysis

MARA's annual growth makes BTC look like chump change. Despite BTC's impressive 1000% return, MARA grew over 9000%. This disconnect in magnitude is likely to catch-up with a company whose few advantages include being one of the only large-scale mining companies and having a large amount of cash on hand.

More mining companies will soon join the scene, causing investors to dismiss MARA's apparent uniqueness. Accompanied by a likely flattening of the BTC curve, MARA will fall at a disproportionate rate to the coin itself – comparable to MARA's rise. If the news and sentiment are not enough to crash MARA, its poor business model will be. Despite a strong year for investors, the company has managed to increasingly lower its (already negative) net income in each quarter. Notably, Q4 2020 had a -$5.23M change in net income, while revenue was $2.64M.

Bitcoin value is not proportional to Marathon's company value. While cryptocurrency will continue to do well or level out, MARA will not.

Disclaimer: This is not investment advice