The digital currency market witnessed a slight decline in 2022 due to the increase in interest rates, regulatory hurdles, and other prevailing macroeconomic challenges which steered investors towards more cautious investments. However, over the past year, the digital currency market regained its momentum as the U.S. Securities and Exchange Commission (SEC) gave the green light to the first Bitcoin exchange-traded funds (ETFs) based on spot prices, and investors anticipated lower interest rates.
The anticipation of the upcoming Bitcoin “halving,” the ongoing network enhancements for the Ethereum Network, and the rising institutional interest in digital currencies have all contributed to a resurgence in bullish sentiments.
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An accessible avenue to capitalize on the market’s expansion is by directly purchasing major digital currencies like Bitcoin and Ethereum on a digital currency exchange. Nonetheless, it is also prudent to diversify your portfolio by investing in promising digital currency companies poised to benefit from the same positive trends. I am optimistic about Marathon Digital (NASDAQ: MARA) and Coinbase Global (NASDAQ: COIN) as promising contenders.
1. Marathon Digital
Marathon Digital is the largest dedicated Bitcoin miner in North America. In 2023, it mined 12,852 Bitcoins, marking a substantial 210% surge from the previous year. By the end of March, the company held 17,381 Bitcoins, totaling $1.6 billion in Bitcoin and cash reserves.
Adverse weather conditions in North Dakota impacted Marathon’s mining operations in the first quarter of 2024. However, the company plans to address these challenges by relocating some miners from North Dakota to Texas and activating numerous new miners. After implementing these adjustments, it anticipates expanding its operational fleet to 235,000 miners with a cumulative production capacity of 29.8 exahashes per second (EH/s) by the end of the year. To provide a comparison, Marathon’s closest competitor, Riot Platforms, concluded March with 112,944 miners, a production capacity of 8.6 EH/s, and only 8,490 Bitcoins in its asset portfolio.
Marathon’s competitive edge over Riot is expected to broaden as it establishes new facilities, acquires smaller mining companies, and extends its mining partnership in Abu Dhabi. Additionally, the company intermittently sells its Bitcoins to generate additional capital to sustain its growth initiatives.
Market analysts anticipate a 35% compound annual growth rate (CAGR) in Marathon’s revenue from 2023 to 2026. While the CAGR for its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) is anticipated to only grow at 1% due to increased spending to amplify the scale of its operations, Marathon’s stock valuation appears reasonable at 6 times this year’s sales and 13 times its adjusted EBITDA.
2. Coinbase Global
Coinbase ranks among the world’s largest digital currency exchanges. As of 2023, it held assets worth $101 billion and was selected as the custodian for eight out of the 11 recently introduced Bitcoin spot price ETFs. Despite the struggles faced by some industry rivals, Coinbase has thrived.
Although Coinbase experienced a 44% decline in its total trading volume in 2023, there was a sequential improvement in the third and fourth quarters as the digital currency market regained its momentum. The company has also started generating a significant portion of its trading revenue from the Tether stablecoin, representing 11% of its trading volume in 2023. This transition might reduce its reliance on Bitcoin, Ethereum, and other more volatile digital assets over the long term.
Analysts project a 21% CAGR in Coinbase’s revenue from 2023 to 2026, accompanied by a 40% CAGR in adjusted EBITDA. Based on these forecasts, the company’s stock is priced at 10 times this year’s sales and 24 times its adjusted EBITDA.
Although Coinbase’s stock may not be considered a bargain at present, it still has significant growth potential in light of the expanding digital currency market. This explains why Cathie Wood of Ark Invest, who envisions Bitcoin reaching $1.5 million in value within three years, maintains Coinbase as a core position across several of Ark Invest’s highly sought-after ETFs. If you share the belief that digital currencies will garner increased interest from both retail and institutional investors, following Ark’s lead and acquiring some shares of Coinbase might be a prudent move.
Is it a Wise Decision to Invest $1,000 in Marathon Digital at Present?
Before venturing into Marathon Digital stocks, it’s worth pondering over the following:
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, and Ethereum. The Motley Fool has a disclosure policy.
In April, Consider Investing in 2 Crypto Stocks with Potential Explosive Growth was originally published by The Motley Fool
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