Summary Bitcoin's recent surge to over $100K may have you feeling like you missed out. Mara Holdings has adopted MicroStrategy's bitcoin treasury strategy, and this should amplify Mara's price if there is a continuation in the bitcoin appreciation. Marathon Holdings, a leading bitcoin miner, is diversifying by mining kaspa, which offers an interesting value proposition for Mara investors. There are risks, which include potential overleveraging into a bitcoin bear market, which could severely impact Mara Holding's shares. Introduction Bitcoin ( BTC-USD ) has experienced an incredible run in the past few months. The recent price appreciation came after it had put many people to sleep after touching new all-time highs in March 2024. In the blink of an eye, the price moved from all-time highs around $70K in November, to over $100K by mid-December. Had you been able to buy the low in August 2024, you would have purchased bitcoin around $50K. Of course, attempting to time the lows is extremely difficult, and dollar-cost averaging on down days would likely serve the average investor much better. Now that bitcoin is trading just below $100K, many may be feeling left behind relative to where it was just last summer. Given the pullback from a high of $108K, now may be an opportune time to purchase bitcoin outright. But owning bitcoin and holding it in cold storage comes with a knowledge gap that can be intimidating to some. Hence, many are unfamiliar or uncomfortable using non-traditional finance such as bitcoin directly. Where does this leave the options for investors that are averse to the nuances of crypto self-custody? One option could mean buying a bitcoin ETF. Another option is buying a bitcoin mining company that holds bitcoin on its balance sheet, like Mara Holdings ( MARA ). Mara Holdings Company Description (Mara Holdings Presentation) Mara Holdings Adopts MicroStrategy's Strategy By now, it's no secret that one of the best performing stocks of 2024 has been MicroStrategy ( MSTR ). MicroStrategy is now famous for implementing a bitcoin treasury strategy, where they issue debt and equity to purchase bitcoin to hold on its balance sheet. I put a hold rating in my first and only article on MicroStrategy back in September 2023 when the price was $30/share when most other analysts had recommended a sell. I could clearly see what MicroStrategy's "strategy" was, but I wasn't sure they would be able to pull it off. At the time, bitcoin was still trading in the mid $20K range and a strong sell-off in bitcoin would threaten MicroStrategy's solvency. But like every good story, Michael Saylor looked out over the abyss, challenging the conventional hive-mind, and came out on top. If you want to understand MicroStrategy, I believe this chart I came across sums it up very well. What this chart demonstrates, simply, is that each quarter, the amount of bitcoin that the company owns per share is increasing. And if bitcoin increases in price, MSTR will increase equal to bitcoin plus some multiple of the growth rate of bitcoin held per share. So far, it seems MicroStrategy has exposed a glitch in the matrix. MSTR Quarterly bitcoin holdings per share (Twitter @benwerkman) MARA Holdings Enters the Game Mara Holdings is the largest publicly traded bitcoin mining company in the world. They have been no doubt, watching as MicroStrategy has acquired an impressive stack of bitcoin without deploying a single bitcoin mining machine; a stack which Mara Holdings can only dream of. Interestingly, MARA holds a distant second-most bitcoin (44,893) on its balance sheet of any publicly traded company behind MSTR. Thanks to observing MSTR's success acquiring bitcoin using the debt and equity markets, Mara Holdings has begun to implement the same strategy. In this article, I want to explore Mara Holdings and make some estimates on what Mara Holdings might look like a year to two years from now. I will look at mostly technical analysis but will also look at some of the fundamentals of the company. Together, this might demonstrate that 2025 to 2026 could be a uniquely bullish period for Mara Holdings. Technical Analysis: A Logarithmic Channel First, let's look at some technical analysis. I don't pretend to be an expert in technical analysis, but I have learned to pay attention to potential logarithmic channels. Often times, it is difficult to identify patterns or clear trading ranges when observing a linear chart. See Mara Holdings' linear chart pictured below. There are some trends worth observing, but I would argue it shows a picture that is clouded. Contrary to the linear chart, the logarithmic chart shows a clear trendline down into the bottoming structure in 2020, and now a reversal and a potential new trend heading upward. When understanding technical analysis, the fundamentals must support the technicals, and given the success that MSTR has had with their strategy, I expect that MARA will now experience similar success as well. Chart 1: Linear Mara Holdings Chart (Tradingview.com) Chart 2: Logarithmic Mara Holdings Logarithmic Chart (Tradingview.com) Mara's New Token: Kaspa ( KAS-USD ) Mara has many different things going on that center around bitcoin and finding the most efficient energy sources possible for operating bitcoin mining machines. But perhaps the thing that is flying under the radar, yet is very exciting for Mara's prospects, is their decision to diversify away from bitcoin and add another token to its mining portfolio. That token is called kaspa, and its name means "silver" in Arabic. If you know anything about the Chairman of MicroStrategy, Michael Saylor, then you know he likes to describe bitcoin as the best way to store monetary energy. And I don't think anyone can convincingly argue against that framework. But bitcoin, while being the best store of value, falls short in functioning as an effective payment system. Without getting into the technical details, there are two quick reasons for this. First, its block times are too slow, and second, its transaction fees are too high. This doesn't negate the fact that it's a wonderful store of value over a long duration. But where bitcoin fails, kaspa appears to be much more effective, while maintaining the bitcoin ethos. This may come as a controversial statement to bitcoin enthusiasts, but bitcoin's primary ethos is decentralization. And while to some, this only means that bitcoin's computer network is decentralized, I like to think about decentralization in much broader terms than that. Only personally speaking, I believe decentralization should not only come in terms of geographic compute, but also in there being numerous networks by which individuals can choose the best network for their specific needs. For true decentralization to exist, there must be multiple networks that are effective as a store of value and payment system. I'm going to assume that for the largest publicly held mining company to choose to invest resources towards a new token, it has been tested and found to be at least as technically sound as bitcoin, and likely more. When you investigate kaspa, its proponents claim it succeeds in delivering superfast block times and low transaction fees while providing the security and decentralization of bitcoin. In other words, it claims to solve the blockchain trilemma . It will be interesting to wait and see how kaspa performs. Given Mara is the earliest public miner to mine kaspa, it is possible that Mara Holdings acquires a superior amount of kaspa relative to any other company, giving it a similar position in kaspa, as MSTR has in bitcoin. Performance Metrics Mara Holdings, like other companies, has performance metrics that show how the company is improving each quarter. In its recent presentation on November 14, at the Cantor Crypto, Digital Assets & AI Infrastructure Conference, they released these charts below. The company has improved in each of the below metrics over the course of the past year. Bitcoin mining is one of the most competitive industries in the world, and so if Mara isn't improving, they will eventually go bankrupt as a company. It's both impressive, and necessary for Mara to make this much improvement over time. Bitcoin Blocks Produced (Mara Holdings Presentation) Compute Power (Mara Holdings Presentation) Daily Cost Per Petahash (Mara Presentation) Average Energy Efficiency (Mara Holdings Presentation) Finding Stranded Energy Energy efficiency is one of the big investment themes of this moment. In order to be successful, bitcoin mining companies scour the globe to find the best opportunities to deploy the most efficient bitcoin mining machines. It is fascinating where companies like Mara find opportunities. You can see below that in addition to their existing infrastructure, they found strategic partnership opportunities in Abu Dhabi and Kenya. Mara Energy Projects (Mara Holdings Presentation) Risks One of the biggest risks for Mara Holdings will be maintaining solvency by keeping a healthy relationship between financing its bitcoin purchases with debt and equity. Bitcoin is a wonderful investment when it's going up, but if a person (or company) uses debt to acquire it, it can also lead to your doom on the way down. My outlook on bitcoin is bullish in the near-term. But if bitcoin's price reaches above $200K, then I would proceed with caution on holding Mara Holdings or MicroStrategy. I would hope that bitcoin's decline during the next bear market will be much milder than those in the past, but I also think that some companies will get overleveraged and get washed out in the next bitcoin bear market. Once the bitcoin party ends, there will be short sellers and general selling pressure on these companies. MicroStrategy and Mara Holding's strategy of selling shares for a greater value amount than the bitcoin currently held per share works great, until bitcoin re-enters a bear market. Meaning, if the value of these company's shares falls below the NAV of the bitcoin they are holding, and they are holding too much debt relative to their bitcoin, then it will create strong downward pressure on bitcoin and the associated company's shares. Shareholders might experience negative performance greater than any decline in the bitcoin price and then be found waiting until the next bitcoin bull market for shares to turn around. That is, assuming the company in question can survive the downturn. Another risk for Mara Holdings is that they have now begun to lend their bitcoin in order to earn interest that can help fund their operations. This introduces counterparty risk and if you have followed bitcoin before 2021, then you recall that many bitcoin lending companies went bankrupt following bitcoin's dramatic decline. The details surrounding Mara's bitcoin lending operation are still unknown, but their latest 10Q showed them earning interest from bitcoin lending. Yet another risk, albeit very unlikely, is that Mara Holding's keys to their bitcoin can become compromised. And if Mara Holdings loses its bitcoin, then their investor's will also lose their investment. As the saying goes in bitcoin, "not your keys, not your coins." Again, this is a very unlikely scenario. Conclusion I am rating Mara Holdings a strong buy going into 2025. Both fundamentals and technicals appear to be aligned for Mara Holdings to perform well. There are, of course, many risks that I covered above. If Mara Holdings can navigate the landscape where bitcoin mining, energy efficiency, bitcoin acquisition, and bitcoin lending intersect, then this is a company whose business model will become very disruptive to traditional finance. With Mara Holdings adopting the MSTR strategy of buying bitcoin with debt and equity financing, we may begin to see Mara's shares come more alive.
