Of the dozen Bitcoin mining companies that are publicly traded, it can be difficult to determine which mining company is most worthy of your investment, in part because the industry is so new.
For miners to maximize their profits, they need to do a few things. First, they need to make sure they are mining as much bitcoin as possible. Just like with conventional mining, companies with the most efficient equipment will have the greatest ability to mine the next block.
To analyze the capacity of Bitcoin miners, the industry uses a statistic known as hashrate. The hashrate represents the mining power that a company possesses. You can compare it to the power of a car. Instead of miles per hour, hashrate is measured in what’s called exahashes per second (EH/s). The higher the hashrate, the more often they will solve these math problems and earn rewards in the form of new coins, thus increasing profitability.
Hashrate expansion is only part of the equation. Since these computers consume a considerable amount of energy, reducing energy costs is where businesses can truly gain a competitive advantage. Investors should look for miners who not only maximize profits and minimize costs, but also prioritize innovation and expansion.
Cut from a different fabric
In the Bitcoin mining industry, there is one company that continues to lead the way in profitability, cost reduction, and new technologies. Marathon Digital Backgrounds (MARA -9.77%) was founded in 2010 just a year after Bitcoin and has never looked back. Since then, the company has become the most valuable Bitcoin mining company in the stock market. With a market capitalization of $1.3 billion, Marathon continues to make progress that could help the stock return to higher prices despite its woes in 2022.
The company currently has a hashrate of around 3.9 PE/s. One of Marathon’s main competitors, Riot Blockchain, is at 4.4 PE/s. Undoubtedly worrying, but there is hope. Marathon is moving aggressively. The company aims to increase its hashrate to 13.3 PE/s in 2022 and hopes to reach a hashrate of 23.3 PE/s by 2023.
To achieve this, it is building new facilities and migrating infrastructure to more cost-effective energy sources. Marathon said in a June press release that it was in the process of moving its mining equipment from a main facility in Montana to West Texas due to maintenance issues and energy costs. The miners moved to West Texas will be followed by an additional 19,000 miners who are expected to be operational this summer. To add more mining power and help meet its ambitious goal of 23.3 PE/s, Marathon will add an additional 68,000 miners, all of whom should be online by the end of September. Based on Marathon’s hashrate today, these additional miners would give the company a much-needed boost and nearly triple its hashrate.
Play the long game
When investors look at Marathon’s past performance and future prospects, it’s clear why it stands out from the crowd. As the most valuable Bitcoin mining company, Marathon has remained at the forefront of this industry for good reason. Even better, the company has also set a goal of becoming carbon neutral by 2023.
Like the Bitcoin it mines, the company is in a unique position. The fall in prices forced the company to readjust and assess its operations. Additional issues with maintenance and energy costs only complicated matters.
But investors should be optimistic. A hashrate of 23.3 EH/s would position Marathon to further increase its dominance among Bitcoin mining companies. More efficient and less expensive energy will ensure the growth of profits. And if Bitcoin can recover from its recent lull, the 9,941 bitcoins the company holds should provide a nice cushion for more profitability.
Considering Marathon’s past performance and its future vision for the company, the recent stock price of around $12 seems like a bargain. If the company can deliver on its word and the macro environment forms, Marathon has every chance of returning to its recent highs of $75 per share.
RJ Fulton has no position in the stocks mentioned. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.