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Why MicroStrategy, Marathon Patent Group, and Riot Blockchain Stocks All Popped Today

By Jon Quast - Updated Jan 22, 2021 at 4:41PM

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Bitcoin was going back up, and MicroStrategy keeps buying in anticipation of a long-term trend.

What happened

Bitcoin was bouncing back on Friday, sending certain stocks higher. Technology company MicroStrategy (MSTR 3.33%) holds thousands of bitcoin tokens on its balance sheet (and is still buying more), which is why its stock was up. And bitcoin mining stocks like Marathon Patent Group (MARA 2.25%) and Riot Blockchain (RIOT 1.24%) were also going up today, reversing some declines in the past week.

As of 3 p.m. EST on Friday, MicroStrategy stock was up 10%, Marathon was up 6%, and Riot Blockchain was up 8%. Cryptocurrencies don't have market hours (they trade all day, every day), so it's best to measure their returns over rolling 24-hour periods. According to cryptocurrency news site CoinDesk, the price of bitcoin had gone up 3% over the last 24 hours. But its price has increased roughly 15% from Thursday's lows.

A businessman draws an exponential growth curve on a graph.

Image source: Getty Images.

So what

According to today's filing with the Securities and Exchange Commission, MicroStrategy has been buying more bitcoin. The company bought another 314 tokens for about $10 million, complying with its new balance-sheet policy. According to the policy, any cash not needed for running the business is to be held in bitcoin.

This brings MicroStrategy's total holdings to 70,784 bitcoin tokens. At the current price (around $33,700 as of this writing), that places the value at almost $2.4 billion. Considering the company's market capitalization is less than $5.4 billion, it's no wonder this stock is as volatile as bitcoin these days: About 44% of its value is in bitcoin. 

For its part, Marathon didn't have any news today, although its stock continues to see heavy trading volume. Riot Blockchain did file with the SEC today. In the filing, the company laid out its payment schedule and delivery timeline for new mining equipment, per its Dec. 18 agreement with Bitmain Technologies. In short, it expects to receive thousands of new Antminers over the next couple of months from this deal alone.

Yesterday, I noted how Riot Blockchain is increasing its mining power to keep up with the rising hashrate of the bitcoin blockchain network. The amount of bitcoin received for mining is proportional to the amount each player contributes to the overall hashrate. As more miners jump in and others increase their power, companies like Riot Blockchain and Marathon have to keep spending to beef up their mining operations.

Stacks of physical, golden coins display the bitcoin symbol.

Image source: Getty Images.

Now what

For MicroStrategy, Marathon, and Riot Blockchain, long-term shareholder returns will likely be greatly influenced by the price of bitcoin. And regarding bitcoin's long-term outlook, MicroStrategy CEO Michael Saylor is obviously upbeat. Why else would his company holds thousands of bitcoin tokens? Today, Saylor appeared on CNBC's Power Lunch to talk about it.

Regarding the new Biden administration, Saylor believes it will eventually address legal ambiguities in cryptocurrencies. Once resolved, this could spark a wave of institutional buyers in assets like bitcoin. This is Saylor's long-term vision: He hopes many companies will do what MicroStrategy has done and hold bitcoin in lieu of cash. To that end, he's hosting a conference in February called Bitcoin for Corporations, in which he'll openly share everything MicroStrategy had to consider as a public company holding bitcoin.

If more companies do what MicroStrategy is doing, the demand for bitcoin will likely outpace its current estimated supply of 900 new tokens per day. This could cause the price of bitcoin to keep going up (incidentally, good for MicroStrategy shareholders).

For now, though, it's still pretty speculative. Indeed, we don't know which companies will attend the conference or what they'll decide afterward. But perhaps it's something investors will hear more about when MicroStrategy gives its quarterly earnings update on Jan. 28.

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Stocks Mentioned

MicroStrategy Incorporated Stock Quote
MicroStrategy Incorporated
$209.50 (3.33%) $6.75
Marathon Patent Group, Inc. Stock Quote
Marathon Patent Group, Inc.
$9.99 (2.25%) $0.22
Riot Blockchain, Inc. Stock Quote
Riot Blockchain, Inc.
$6.92 (1.24%) $0.09

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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