MicroStrategy (NASDAQ:MSTR) And Marathon digital (NASDAQ: MARA) represent two different ways to invest Bitcoin (CRYPTO: BTC). MicroStrategy was once a slow-growing enterprise software company, but it went all-in on Bitcoin by buying the world’s top cryptocurrency over the past four years. Marathon was originally a small patent company, but over the past six years it bought a large number of Bitcoin miners to become the largest mining company in the world.
Over the past 12 months, the price of Bitcoin rose by approximately 145% while interest rates fell. Shares of MicroStrategy rose nearly 540% in that period, but shares of Marathon advanced less than 120%.
Both stocks benefited from Bitcoin’s recovery, but investors seemed more impressed by MicroStrategy’s simple strategy to accumulate Bitcoin than Marathon’s capital-intensive approach to mining Bitcoin. So will MicroStrategy remain a better play in the Bitcoin market than Marathon Digital?
MicroStrategy’s strategy is bold but unbalanced
MicroStrategy’s core business of selling data mining and analytics software has been at a standstill over the past decade. From 2013 to 2023, its annual revenue fell from $576 million to $496 million as it struggled to keep pace with faster-growing cloud-based software companies such as Microsoft And Salesforce.
So in 2020, MicroStrategy Chief Executive Officer Michael Saylor directed the company to start buying Bitcoin with an initial purchase of $250 million. Saylor stepped down as CEO in 2022 but stayed on as executive chairman, and the company had amassed 226,500 bitcoins — currently worth about $14.2 billion — by the end of the last quarter. It only paid an average price of $36,821 per Bitcoin for that huge investment.
MicroStrategy’s Bitcoin holdings now account for 30% of its $46.9 billion enterprise value. Earlier this year, Saylor predicted that the price of the cryptocurrency would reach $13 million over the next 21 years. That rally would increase the value of his current Bitcoin holdings to $2.94 trillion. Assuming MicroStrategy continues to accumulate the digital currency over the next twenty years, it could transform itself into a Bitcoin holding company as its legacy software business disappears.
MicroStrategy is trying to stabilize its software business by expanding its cloud-based subscription services, but its main goal is to simply generate more cash and take on more debt for its Bitcoin purchases. It has also more than doubled its share count over the past four years with stock offerings to buy more crypto. Total liabilities have more than quadrupled since the end of 2020 and analysts expect the core business will not be profitable for years to come.
The bulls believe MicroStrategy’s large and unbalanced bet on Bitcoin will pay off, but the bears think it could collapse under the weight of its own debt and dilution if Bitcoin crashes. Therefore, MicroStrategy is a double-edged sword: it could certainly generate bigger profits than Bitcoin, but it could also suffer bigger losses if the price plummets.
Marathon’s mining strategy is losing its luster
Marathon Digital ordered its first Bitcoin miners in 2018 and currently has a fleet of over 245,000 active mining machines. The activated hash rate, which measures mining efficiency, increased more than tenfold from 3.5 exahashes per second (EH/s) at the end of 2021 to 36.9 EH/s at the end of September 2024. Its largest competitor, Riot platforms (NASDAQ:RIOT)had an operational hash rate of 19.5 EH/s at the end of September.
Marathon is selling its own Bitcoin holdings to fund its operations, but still held 26,842 Bitcoins at the end of September, worth about $1.7 billion. That’s 35% of its $4.83 billion enterprise value. Riot only had 10,427 bitcoins in its possession at the end of September.
Marathon may seem undervalued relative to the bitcoins on its balance sheet, but it operates a more capital-intensive business than MicroStrategy. It costs a lot of money to power the miners, and rising energy prices and the recent halving in April – which cut rewards for mining the crypto in half – have made it even more expensive to mine Bitcoin. That difficulty will become even steeper when the next halving takes place in 2028.
Marathon is trying to offset that pressure by acquiring other smaller U.S. miners and launching a new joint venture in Abu Dhabi. The bulls expect economies of scale to kick in and offset rising costs, but the bears think it’s a losing battle.
It ended its latest quarter with a seemingly low debt-to-equity ratio of 0.1, but that’s mainly because it has already increased its number of shares outstanding by 3,650% over the past five years to finance the expansion of its mining fleet. Analysts also expect the company to incur net losses over the next two years as it tries to scale up its operations.
The better buy: MicroStrategy
MicroStrategy’s big bet on Bitcoin is risky, but it’s still more sustainable than Marathon’s messy mining operations. MicroStrategy’s value will soar as the digital currency recovers, but Marathon must overcome rising costs and more halvings to stay ahead of Bitcoin. Therefore, I would still rather invest in the former than the latter.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Microsoft, and Salesforce. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
Better Bitcoin Stock: MicroStrategy vs. Marathon Digital was originally published by The Motley Fool
