Is Marathon Digital Holdings the Best Way to Play Crypto?

Stock Market

There is no question Marathon Digital Holdings (NASDAQ:MARA) is on a roll. MARA stock is up more than 350% year-to-date. There’s been no stopping this crypto miner. 

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In fact, InvestorPlace’s Ian Cooper recently named it one of the 5 Stocks to Buy and Hold For the Next Decade. They’ve all got the potential to make patient investors very wealthy.  

His rationale: When Bitcoin (CCC:BTC-USD) moves higher, so does MARA. I totally get the sentiment. 

However, this is a subject area that’s still very much evolving. As an investor, can you say with 100% certainty that Marathon Digital is the best crypto miner going? 

Further, is a bet on this or other crypto miners a safer alternative to Bitcoin, Ethereum (CCC:ETH-USD), or one of the other cryptocurrencies? And lastly, what about the makers of the mining machines. Don’t they deserve some attention? 

With all the frothiness surrounding the markets today, I question naming Marathon Digital a stock to own for the next decade. To me, a company like Lululemon (NASDAQ:LULU) makes a lot more sense, but that’s a discussion for another day. 

Here are three alternatives I would consider instead of Marathon Digital.

Go for BLOK Instead of MARA Stock

I like to provide my readers with options. There’s always an alternative. If not A, why not B? If not Marathon Digital, why not Amplify Transformational Data Sharing ETF (NYSEARCA:BLOK)?

In early March, I suggested the ETF because it invested in companies developing and utilizing blockchain technologies. MARA is currently the fourth-largest holding of the $1.27-billion portfolio with a weighting of 4.97%. 

Sure, it charges 0.71%, but that’s so you don’t have to do a lot of the heavy lifting. It’s up 62% year-to-date. It can’t hold a candle to MARA — up 367% over the same period — but MARA doesn’t give you the diversification that 54 holdings do. 

If ever there was a thematic ETF to buy, BLOK would be it. 

A Large Cap or Two

Who are the biggest companies holding Bitcoin? 

Benzinga reported in February that Tesla (NASDAQ:TSLA) and Square (NYSE:SQ) together had unrealized gains of $5 billion from their respective investments. In fairness to my colleague, he did have Tesla in his list of five stocks. Both of these companies have so much going on; I don’t see how Marathon Digital can hold a candle to either of them.

In fact, Square CFO Amrita Ahuja told Fortune that Bitcoin could soon be an important part of every large company’s balance sheet

“There’s absolutely a case for every balance sheet to have Bitcoin on it. We see Bitcoin and cryptocurrencies as expanding access to financial services, especially when you think more globally,” Ahuja said. 

Interestingly, Ark Invest (NYSEARCA:ARKK) CEO Cathie Wood suggested that if every S&P 500 company invested 10% of their cash into Bitcoin, the price would rocket to $400,000 per coin. That’s another reason to own an S&P 500 index fund. 

Large-caps are moving to hold Bitcoin. The ones that do, such as Square and Tesla, are excellent alternatives.

Wait for Bitmain

In mid-March, I suggested that investors considering MARA should either buy Bitcoin itself or wait for Bitmain to go public now that its founders have settled their differences. In January, another maker of mining machines, MicroBT, was rumored to be close to going public. It’s considered an IPO since 2019. 

Another possibility is Canaan (NASDAQ:CAN), a big manufacturer of crypto mining equipment, if you can’t wait. It’s actually the 1oth-largest holding in BLOK at 3.45%. Its stock is up 270% YTD.

I’m sure there are others that I haven’t considered. 

The Bottom Line

It seems that companies operating in the hot sectors of the markets such as cryptocurrencies can set their own prices. No valuation is too high regardless of the underlying financials.

The cryptocurrency exchange Coinbase, which is expected to go public in April, has apparently been valued at $100 billion, despite some industry experts expecting crypto trading fees to experience a “race to the bottom,” as was the case for stock trading fees. When that happens, Coinbase’s valuation should take a serious hit.   

Much like the electrification of transportation, cryptocurrencies and the related companies utilizing or benefiting from them are in the early part of a 20-inning baseball game.

If you bet on MARA, try to do it in a way that insulates you from some of the potential downsides, because there are plenty of other horses in this race. 

In my view, MARA isn’t close to being the best way to play crypto.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.