Marathon Digital, Riot Blockchain: 2 Slumping Crypto Miners Now In The Buy Zone?

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  • The bearish trend in cryptos continues
  • MARA: darling turned dog since November 2021
  • RIOT: a falling knife
  • Both stocks are cheap; call options without expiration dates
  • Treat MARA and RIOT like cryptos; only invest capital you can afford to lose

It's been a rough year for the cryptocurrency asset class. After head-spinning gains over the past years, prices in 2022 are lower, and the speculative frenzy has turned into disappointment for late-comers to the asset class.

Though the continuation of boom-and-bust price action in the crypto arena shouldn't be surprising, for those who hopped on board the bullish trends in late 2021, it's been a bitter disappointment. Indeed, while some continue to lick financial wounds, others have already capitulated and sold out in order not to lose even more via cryptocurrency holdings.

Two equity darlings of the cryptocurrency boom were Marathon Digital Holdings (NASDAQ: MARA ) and Riot Blockchain (NASDAQ: RIOT ). Both mining companies soared along with Bitcoin and other cryptocurrency prices. But in 2022, as digital currencies continue to slump, the share prices of MARA and RIOT have evaporated, with both doing even worse than Bitcoin and Ethereum on a percentage basis.

Rising energy prices have made mining more expensive while falling cryptos have made a lousy environment even worse.

With MARA and RIOT now both below the $10 per share level, the downside is limited. But the upside potential could be attractive if a crypto recovery is on the horizon.

The bearish trend in cryptos continues

Bitcoin and Ethereum prices continue to sit near the recent lows, far below the prices in mid-November 2021.


Source: Barchart

The chart above shows that at just over the $29,150 level on June 10, Bitcoin was sitting $3,230 above the May 12 low. At time of publication, the leading cryptocurrency is trading even lower at $24,752, just a hair above the 52-week low. And currently, it's $44,173 below the Nov. 10 high.


Source: Barchart

At the $1,675 level on June 10, Ethereum had just hit a new low, but it's currently trading even lower at $1,280, hovering just above its current new low. The token is also $3,585 below its Nov. 10 peak.

It takes a lot of computer power to mine cryptos, which requires significant amounts of energy. A combination of low crypto prices and sky-high energy costs make crypto mining a losing proposition in the current environment. 

MARA: darling turned dog since November 2021

Marathon Digital Holdings (MARA) is a Las Vegas-based digital asset technology company that mines cryptocurrencies and focuses on the blockchain ecosystem and the generation of digital assets.

As Bitcoin and other digital currency prices exploded in 2021, MARA shares made higher lows and higher highs.

MARA Weekly 2019-2022

Source: Barchart

The chart shows MARA shares peaked at $83.45 on Nov. 9, 2021, the day before Bitcoin, Ethereum, and other cryptos reached record highs. As of June 10, Bitcoin was 57.7% lower from the mid-November apex, and Ethereum had declined by 65.6%. Both are even lower now.

Over the same period, MARA shares moved 91% to the downside, closing at the $7.54 level on Friday, June 10. 

RIOT: a falling knife

Riot Blockchain, Inc. (RIOT), with headquarters in Castle Rock, Colorado, leverages its expertise and network to build and support blockchain technology companies. The company’s description states RIOT is:

Establishing an Advisory Board with technical experience intending to become a leading authority and supporter of blockchain, while providing investment exposure to the rapidly growing blockchain ecosystem.

Like MARA, RIOT is a crypto mining company.

While MARA made higher highs in 2021, RIOT only managed a lower high in mid-November, a sign that trouble was already on the horizon.

RIOT Weekly 2019-2022

Source: Barchart

RIOT's high came on Feb. 17, 2021, at $79.50 per share. It closed on Friday, June 10, at $5.17—93.5% below the 2021 peak. 

Both stocks are cheap; call options without expiration dates

While the price action in Bitcoin, Ethereum, and many of the over 19,800 cryptos has been awful since November 2021, returns on MARA and RIOT can be characterized as nothing short of horrendous. With crude oil around $120 per barrel and natural gas at the highest price in fourteen years, power prices are simply sky-high, increasing mining costs even as cryptocurrency prices sit near the recent lows.

MARA and RIOT shares have dropped to levels where the downside is limited, but the upside potential could be compelling. I view both company’s shares as call options with no expiration date at $7.54 and $5.17 on June 10. 

Treat MARA and RIOT like cryptos; only invest capital you can afford to lose

When considering buying MARA and RIOT, keep in mind that while the downside is zero, the companies could run out of capital and go belly up.

MARA’s market cap at Friday's close was $801.57 million; RIOT’s stood at $699.75 million. I view RIOT and MARA as assets that reflect the same risks as Bitcoin, Ethereum, and many other cryptocurrencies. Any bets on the stocks have the potential for a total loss of the capital you invest.

Risk is always a function of potential rewards. MARA and RIOT may be inexpensive with lots of upside promise, but they could also become unpriced dust collectors in portfolios if cryptocurrencies, and the mining that produces them don't make substantial comebacks.

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