MicroStrategy vs. Marathon Digital: The Best Bets for Bitcoin Investment

MicroStrategy (NASDAQ: MSTR) and Marathon Digital (NASDAQ: MARA) offer distinct approaches to investing in Bitcoin (CRYPTO: BTC). Once a slow-moving software company, MicroStrategy has embraced Bitcoin as a major investment. In contrast, Marathon, initially a small patent-holding firm, has transformed into the world’s largest Bitcoin mining company in the past six years.

Over the last 12 months, Bitcoin’s value surged about 145% as interest rates declined. MicroStrategy’s stock skyrocketed nearly 540%, while Marathon’s stock saw an increase of less than 120%.

Image source: Getty Images.

While both companies gained from Bitcoin’s upswing, investors seem more impressed with MicroStrategy’s straightforward strategy of accumulating Bitcoin compared to Marathon’s complex mining operations. The question remains: Can MicroStrategy maintain its edge over Marathon Digital in the Bitcoin market?

MicroStrategy’s Bold Yet Risky Strategy

MicroStrategy’s primary business of data analytics has been stagnant, with annual revenue falling from $576 million in 2013 to $496 million in 2023, struggling against fast-growing cloud firms like Microsoft and Salesforce.

In 2020, CEO Michael Saylor guided the company to invest heavily in Bitcoin, starting with a $250 million purchase. Even after stepping down as CEO in 2022, Saylor remains as executive chairman. By the end of the latest quarter, MicroStrategy had acquired 226,500 Bitcoins, valued at roughly $14.2 billion, at an average cost of $36,821 each.

Currently, MicroStrategy’s Bitcoin holdings comprise 30% of its enterprise value, which totals $46.9 billion. Earlier this year, Saylor forecasted that Bitcoin’s price could reach $13 million over the next 21 years. This predicts a potential increase in value of its holdings to $2.94 trillion if the company continues to buy Bitcoin over the long term.

While MicroStrategy aims to stabilize its software business by enhancing its cloud services, its main goal appears focused on generating additional funds for Bitcoin purchases. Over the past four years, it has doubled its share count through stock offerings to finance these acquisitions, resulting in liabilities quadrupling since the end of 2020. Analysts anticipate that its core business will remain unprofitable for the next few years.

Supporters believe MicroStrategy’s significant investment in Bitcoin will reap rewards, but critics express concern over the risks of debt and dilution should Bitcoin’s value drop. Ultimately, MicroStrategy presents a high-risk, high-reward scenario, potentially yielding greater returns than Bitcoin but also exposing investors to severe losses.

Marathon’s Mining Operations: Struggling to Keep Up

Marathon Digital began acquiring Bitcoin miners in 2018 and currently operates over 245,000 mining machines. Its hash rate—an indicator of mining efficiency—increased more than tenfold, rising from 3.5 exahashes per second (EH/s) at the end of 2021 to 36.9 EH/s as of September 2024. For reference, Riot Platforms (NASDAQ: RIOT) had a hash rate of 19.5 EH/s at that time.

Marathon sells a portion of its Bitcoin to fund operations while still holding 26,842 Bitcoins worth approximately $1.7 billion, making up about 35% of its enterprise value of $4.83 billion. In contrast, Riot held just 10,427 Bitcoins.

Despite appearing undervalued given its Bitcoin holdings, Marathon’s operations demand significant capital. Rising energy costs and the halving event in April, which cut mining rewards in half, have intensified the financial strain. As Bitcoin halvings are expected to continue every four years, operational challenges may deepen with future halvings.

To mitigate rising expenses, Marathon is investing in acquisitions of smaller U.S. miners and pursuing a joint venture in Abu Dhabi. While optimists speculate these moves will lead to greater efficiency and profits, skeptics worry it could prove ineffective.

Marathon’s low debt-to-equity ratio of 0.1 may seem favorable, but this is largely due to a staggering increase in shares outstanding by 3,650% in five years to support mining fleet expansion. Analysts predict continued net losses for at least two more years as the company looks to grow.

Final Thoughts: MicroStrategy is the Safer Bet

MicroStrategy’s significant Bitcoin investment strategy poses risks but appears more stable than Marathon’s tumultuous mining approach. Should Bitcoin rally, MicroStrategy stands to gain immensely, whereas Marathon faces rising costs and future halving challenges. Therefore, investing in MicroStrategy remains the preferred choice over Marathon Digital.

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Leo Sun holds no positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Microsoft, and Salesforce. The Motley Fool recommends long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.