Please ensure Javascript is enabled for purposes of website accessibility

Why Marathon Digital Holdings Stock Fell 33% in May

By Anders Bylund - Jun 9, 2021 at 4:37PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Spoiler alert: The largest cryptocurrency also took a 33% haircut last month.

What happened

Shares of cryptocurrency mining specialist Marathon Digital Holdings (MARA 0.06%) fell 32.6% in May 2021, according to data from S&P Global Market Intelligence. It's no coincidence that the price of Bitcoin (BTC -1.63%) also fell approximately 33% last month.

So what

It's not that Marathon didn't have any news of its own in May. The company reported mixed first-quarter results, added two new names to its boardroom, and planned out a 300-megawatt Bitcoin mining location in Texas. Marathon mined 192 Bitcoin tokens in the first quarter and invested $150 million in buying another 4,813 Bitcoins. But the market largely shrugged off all of these moves to focus on a shaky Bitcoin chart instead.

Bitcoin's travails in May have been well documented elsewhere, but here's a high-level overview. The leading cryptocurrency entered the month with prices north of $57,000 per token, itching to cement a two-month period of relative stability. Instead, Bitcoin prices fell sharply amid an avalanche of negative developments. Chinese regulators cracked down on cryptocurrency trading in general, Tesla suspended the option to pay for your next electric car in Bitcoin, and Tesla CEO Elon Musk started sending mixed messages about cryptocurrency investments.

All of this happened during a tough earnings season for technology stocks as a whole, which created a marketwide retreat from volatile high-growth investments and into ultra-stable value assets. Bitcoin and other cryptocurrencies fit the bill to a T, adding to the Chinese and Tesla-based sell-side pressure.

A silver Bitcoin symbol stands on a large red question mark.

Image source: Getty Images.

Now what

Bitcoin prices have been volatile in early June as well, mixing a couple of good days into a broadly negative trend. Marathon's stock has largely followed suit, as expected.

Whenever Bitcoin goes through a bull market, crypto-mining stocks such as Marathon tend to amplify the uptrend and soar to incredible new heights. The same goes for bear markets and crashing stock prices. Marathon investors kind of dodged a bullet in May from that perspective, simply matching the Bitcoin market's downward move rather than magnifying it.

Bitcoin itself looks like a peaceful oasis of stability next to Marathon, and that's saying something. Ambitious investors may want to pick up a few Marathon shares at these lower prices but the stock was never exactly cheap and the market risks are still massive. Keep your Marathon buys small and speculative. The stock might skyrocket if the Bitcoin bull market reignites, or crash and burn if cryptocurrencies take a nosedive and Marathon runs out of cash instead.

Anders Bylund owns shares of Bitcoin and Tesla. The Motley Fool owns shares of and recommends Bitcoin and Tesla. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Marathon Digital Holdings, Inc. Stock Quote
Marathon Digital Holdings, Inc.
MARA
$17.20 (0.06%) $0.01
Tesla, Inc. Stock Quote
Tesla, Inc.
TSLA
$878.30 (2.14%) $18.41
Bitcoin Stock Quote
Bitcoin
BTC
$23,959.13 (-1.63%) $-396.38

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
389%
 
S&P 500 Returns
125%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/12/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.