A digital gold rush has gripped markets, making the launch of the first fully compliant Bitcoin mining pool based in the US a catalyst for Marathon Digital Holdings’ [MARA] share price rise. The stock jumped 15.8% to $44.14 on 30 March following the announcement.
Marathon Digital’s share price gained 59.3% in March alone, extending its growth in the first quarter to 360% and for the year to 6 April’s close to 376.4%.
Shares in the digital asset technology company continued to rally this month, hitting an intraday high of $57.17 on 5 April, before closing at $56.56, up a further 28.1%. The stock has since suffered a pullback, dropping 8.26% to $52.45 by close on 6 April.
According to ETF.com, circa 2.2 million Marathon Digital shares are held across nine ETFs in the US. The Amplify Transformational Data Sharing ETF [BLOK], which had a 5.24% weighting in the stock as of 7 April, was up 59.6% in the first quarter of 2021 to 31 March.
Diving for treasure
The launch of Marathon Digital’s mining pool comes as institutional interest in Bitcoin is accelerating. In an effort to ease corporate distrust, Merrick Okamoto, CEO of the company, said that its “pools’ initiatives are grounded on decentralisation, transparency, legal compliance with US rules and regulations, and independent auditability under US auditing standards”.
"[Marathon's] pools’ initiatives are grounded on decentralisation, transparency, legal compliance with US rules and regulations, and independent auditability under US auditing standards" - Merrick Okamoto, Marathon CEO
Being the first mining pool in North America to be fully compliant with US regulations will see it exclude transactions from the US Department of Treasury’s Specially Designated Nationals and Blocked Persons List.
The mining pool will use exclusively licensed technology from DMG Blockchain Solutions [DMGI.V] to filter the transactions and ensure compliance with anti-money laundering rules and the Office of Foreign Asset Control’s standards.
Just one day after the announcement, the two companies said they had penned a definitive license agreement to provide technology solutions for Marathon Digital and the Digital Currency Miners of North America — the first cooperative mining pool in the US, which was launched in January.
Marathon Digital said it will begin directing 100% of its hash rate (a measure of computational power per second) to the new mining pool on 1 May and has said that it will start accepting other US-based Bitcoin mining companies on 1 June. By the first quarter of 2022, the company expects all 103,120 of its miners to be deployed.
The company’s mining team produced 196 new Bitcoins in the first quarter of 2021, increasing its holdings to circa 5,134.20. At the time of the report’s release, the price of Bitcoin was $58,800, making the value of its holdings $301.9m.
Bullish on Bitcoin
According to data from Morningstar, cryptocurrencies were the best-performing asset class in the European ETF market during January and February. The high returns have made it a popular play with investors, and companies in the US want to get in on the action.
China leads the world’s mining hash rate, with mining pools in the region generating an estimated 65% of the global total, according to Bitcoin Magazine.
“The appetite for mining firms to go public has never been greater, as publicly-traded mining companies Riot Blockchain [RIOT], Marathon Patent Group and Hive Blockchain [HIVE.V] have all passed a $1bn valuation,” Ryan Porter, head of business development at BitOoda, told the publication.
"The appetite for mining firms to go public has never been greater" - Ryan Porter, BitOoda
Marathon Digital’s mining pool joins peers such as Titan Mining [TI.TO], which launched the first enterprise-grade Bitcoin mining pool in North America in December last year.
Okamoto believes shifting more mining power to the US could reduce the risks around transparency that threaten the wider industry. In a statement, he suggested that the pool had the potential to become the seventh-largest in the world, “putting North America on the map as a digital-asset mining hub.”
When asked in a Benzinga interview about the company’s future, Okamoto said that he didn’t plan to sell any Bitcoin.
Marathon Digital shares had a moderate buy rating from one analyst on TipRanks, with an average price target of $50.00, representing a 1% increase from its closing share price on 6 April.