The cryptocurrency mining sector rallied a bit on Tuesday, and in response, investors placed bets on Marathon Digital Holdings (NASDAQ: MARA ), not only a company that is gaining ground, but also other well-known stocks and companies in the sector.
While Marathon's stock is up about 11%, smaller company Cipher Mining (NASDAQ: CIFR ) is up more than 14%. TerraWulf (NASDAQ: WULF ) and SOS Limited (NYSE: SOS ) also gained 9% and 10% on the day. By comparison, the broader S&P 500 rose just 0.6%.
The value of the Marathon deal is about $180 million.
Before the market opened, Marathon shocked the cryptocurrency mining industry by announcing that it had agreed to buy a pair of mining positions in Bitcoin (CRYPTO:BTC) . The couple bought subsidiaries of the finance company Generate Capital for $178.6 million. The purchase price must be paid in full in cash.
The two sites, one in Texas and one in Nebraska, have a combined generating capacity of 390 megawatts. The cost of transmission is $458,000 per megawatt.
This is a historic acquisition for Marathon as both locations will be wholly owned. After the conclusion of the transaction, the capacity of the enterprise will increase to 910 MW. Of this total, 45% will be owned by utilities, and the rest by third-party business partners.
In a press release about the acquisition, Marathon said it expects to reduce bitcoin mining costs per coin by 30% on the new sites.
It also quotes CEO Fred Thiel as saying the deal will be transformative, turning the company into a "more advanced and mature company with a diverse portfolio of bitcoin mining technologies and assets."
Investors clearly bought into that argument, judging by the enthusiasm with which they jumped into the stock market marathon after the announcement. The deal led to speculation about other acquisitions (and high demand for Bitcoin miners in general), which led to higher prices for other miners such as TerraWulf and SOS.
Is Bitcoin Falling?
Of course, the sentiment of Bitcoin miners depends a lot on the market sentiment towards Bitcoin. Although the price of the main cryptocurrency has fallen in recent days, it is historically very high. In fact, it's up more than $42,000 from its current level in two runs earlier this decade. And since Bitcoin is such a hot topic, you can bet that any miners who take steps to consolidate will be rewarded equally.
Should I invest $1,000 in Marathon Digital right now?
Before you buy Marathon Digital stock, consider the following:
Analysts at the Motley Fool Stock Advisory Group have revealed the top 10 stocks investors can buy right now... and Marathon Digital wasn't one of them. The 10 selected stocks are likely to deliver phenomenal returns in the years to come.
Stock Advisor offers investors a simple plan for success, including portfolio building tips, regular analyst updates and two new stock picks every month. Since 2002, the stock advisory service has tripled the performance of the S&P 500 index.
See 10 values
*The stock advisor will return on December 18, 2023
Eric Volkman has a position in Bitcoin. The Motley Fool publishes and recommends Bitcoin. The Motley Fool has a disclosure policy.
Originally Posted by The Motley Fool Why Marathon Digital and Other Crypto Mining Shares Soared Today