Shares of cryptocurrency-mining company Marathon Digital (MARA -16.53%) are having a stellar week. As of 10:15 a.m. ET on Friday, Marathon stock is up a whopping 67% just this week. These outsize gains are partly attributable to a stabilizing cryptocurrency market and the rising price of Bitcoin (BTC -2.01%). However, Marathon Digital also secured an important piece of the puzzle for growing its mining business in the coming year.
On July 18, Marathon Digital announced that Applied Blockchain (APLD -5.47%), Compute North, and other companies would be supplying it with hosting capacity for 23.3 exahashes per second (EH/s) of Bitcoin mining. That's a mouthful, so let's break down why it's important.
Bitcoin mining companies like Marathon Digital supply computer power to the network and process transactions. The computing power is measured in what's called the hash rate. The current hash rate for the entire network is about 193 million terahashes per second (TH/s), or 193 EH/s, according to Blockchain.com.
In July 2020, Marathon Digital had less than 0.2 EH/s of Bitcoin miners deployed. But by early next year, the company wants to have 23.3 EH/s operational -- roughly 100 times what it had in July 2020. The problem is, Bitcoin mining is energy intensive, and this ambitious growth plan needed power.
Marathon Digital's facilities for its mining machines in Texas and North Dakota are being built now. And its agreement with Applied Blockchain, Compute North, and others will ensure these plants get powered up quickly so the company starts making substantially more Bitcoin as soon as possible.
This news is consequential for Marathon Digital shareholders. But everything about the stock hinges on the price of Bitcoin. The company holds over 10,000 Bitcoin and generates revenue in that crypto, not dollars. Therefore, as its price fluctuates, so too does the value of Marathon Digital's assets and income. For this reason, developing a strong opinion on the future price of Bitcoin is paramount for any Marathon Digital investment thesis.