Shares of Marathon Digital Holdings (MARA 6.11%) were up 200.5% in the first half of 2021, according to data provided by S&P Global Market Intelligence. Shares have since pulled back some and are now "only" up 140% year to date. This is still market-crushing performance and likely resulted because the company has bolstered its balance sheet and significantly increased its capacity for mining Bitcoin (BTC -0.03%).
Interestingly, Marathon Digital stock has not only crushed the market this year, it's also greatly outperformed Bitcoin, which is only up 11% year to date, as of this writing. Investors are likely pleased with the company's balance sheet.
On Jan. 4, it announced it had raised $200 million to bring its cash balance to $217.6 million -- an impressive jump. Weeks later, it raised $250 million more via a stock offering, and quickly used $150 million to buy over 4,800 bitcoins.
The increase in cash is good for Marathon Digital because it has a lot of capital needs over the next year as it increases its computing power for mining. For example, on Feb. 1, the company announced it had received 4,000 new antminers that more than tripled its power at the time.
By the end of March, ongoing shipments brought its power to 1.4 exahashes per second (EH/s). However, it expects to be at over 10 EH/s by early 2022, which should greatly increase the amount of Bitcoin it can mine.
Right now, with the price of Bitcoin still over $32,000, mining is a profitable venture. Of course, the price of Bitcoin isn't always at a price where mining is profitable, but that's outside of Marathon Digital's control. Having such an important thing outside of its control is why I've never been a fan of investing in a cryptocurrency mining company.
That being said, Marathon Digital is doing everything right inside of its control. It's using its elevated stock price to raise cash on favorable terms and using cash to buy mining equipment to profitably mine more Bitcoin. That's what you want Marathon Digital to do if you're a shareholder.
Going forward, investors should pay attention to how much Bitcoin Marathon Digital is mining. Through the first six months of the year, it's mined 846 Bitcoins, and its hash rate is now over 2 EH/s. And as of June, it's mining 265 bitcoins monthly.
Considering the company expects to quintuple its hash rate in the coming months, investors can expect its monthly Bitcoin haul to also increase drastically. And if the price of Bitcoin keeps going up (there is a potential catalyst later this year), it could be a great situation for Marathon Digital shareholders.