Bullish Case For Bitcoin Mining: Marathon Digital & Riot Blockchain

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Compared to last decade, stock market returns over the next 5 – 10 years are projected to decrease. Investment managers can no longer rely on passive index strategies as their main source of growth – as these are likely to produce lower returns and higher volatility relative to historical levels.

JP Morgan’s 2022 long-term capital market assumptions expects bonds to return just 2.5% and large cap US stocks to return approximately 4%. The market is currently within the late stages of the business cycle, and business models that worked last decade will not work into the next decade. This points to a need to seek new sources of returns.

Over the next few years, slowing economic growth and poor earnings across sectors should increasingly incentivize investors to allocate capital to the Bitcoin (BTC-USD) mining network – which represents a new, uncorrelated, high growth, and high profit ecosystem.

In other words, since Bitcoin mining provides relatively low-risk and high-profit returns (currently 6.25 BTC per block mined) this means Bitcoin mining stocks can perform well despite a deflationary economy.

Marathon Digital (NASDAQ:MARA) and Riot Blockchain (NASDAQ:RIOT) are two of the largest and fastest growing institutional Bitcoin miners. After a highly profitable 2021, these companies now plan to rapidly expand operations through 2022.

Bitcoin Mining Is An Ever-Expanding Economy

To understand why BTC miners maintain a uniquely bullish outlook, you need to first understand that Bitcoin’s mining network maintains an economic incentive to expand infinitely.

As a result of ever-increasing advancements in technology, the BTC mining network can seemingly grow indefinitely – while also maintaining profitability through Bitcoin’s logarithmic price growth. This system incites innovation (loosely following Moore’s Law) and creates powerful network effects where the biggest miners grow bigger.

Put more simply, since technology is constantly improving, it follows that Bitcoin’s mining network is continuously expanding. Year-over-year improvements to Bitmain’s AntMiner series exemplifies the correlation between technological advancements and mining network expansion:

bitmain antminer improvements

bitmain antminer improvements (ResearchGate)

Since its creation in 2013, the AntMiner has consistently reduced its power consumption and improved its hash rate each year. Simultaneously, Bitcoin’s hash rate (a measure of the total computational energy currently mining Bitcoin) has grown 860,000% since 2013:

BTC hash rate

BTC hash rate (Glassnode)

Eventually the Bitcoin mining network should find equilibrium and expand more gradually. Today, however, we are still in the early days.

Additionally, while being in the early days brings high profits, it also brings high risk. Bitcoin mining is seen as controversial by most governments. Egypt, Iraq, Morocco, Qatar, Algeria, Tunisia, Oman, Bangladesh, and China have all outright banned cryptocurrency.

Over the past few years, some American political figures have become increasingly agitated by Bitcoin mining, specifically. Therefore, for the foreseeable future, expect regulation to remain as a risk to the Bitcoin mining network.

Expansion Of Institutional Bitcoin Miners

As a result of an exceptionally profitable 2021, institutional Bitcoin miners are relentlessly expanding their operations this year. Bitcoin’s hash rate is expected to increase to 225 / 270 EH/s through 2022. As you can see in the chart below, Marathon Digital and Riot Blockchain are two of the largest hash rate contributors:

Bitcoin miners expected hashrate

BTC miner expected hashrate (Arcane Research)

Marathon Digital expects to reach a staggering 23.3 EH/s, and Riot Blockchain expects to reach 12.8 EH/s within the next year. Not accounting for electricity costs, these hash rates would bring Marathon Digital $1.6 billion / year and Riot Blockchain $880 million / year (source).

Marathon Digital & Riot Blockchain – 2021 Earnings

Bitcoin miners earned more than $15 billion in revenue over the course of 2021, according to The Block Research. This represents a year-over-year percentage revenue increase of 206%.

Below are MARA and RIOT’s 2021 full-year revenues:

Company 2021 Revenue YoY % Increase Source
$150.5 million 3,353% source
Riot Blockchain $213.2 million 1,665% source

Most institutional Bitcoin miners are very deep in profit – far enough to easily withstand Bitcoin’s price volatility. As displayed in the chart below, miners generally never spend their Bitcoin. According to Glassnode, “miners” hold an impressive (and concerning) 1.7 million Bitcoin:

BTC miner unspent supply

miner unspent supply (Glassnode)

To put more context behind the above chart, “miner supply” represents the total amount of coins in Coinbase transactions that have never been moved. This extremely high number (1.7 million BTC (worth $70 billion)) is concerning because it is unclear how much of this Bitcoin is lost vs actively held.

Marathon Digital currently holds 8,956 BTC, while RIOT holds 5,783 BTC, according to Arcane Research. Astonishingly, if both companies reach their 2022 projected hash rates, then Marathon would earn an additional 38,900 Bitcoin, while Riot would earn 21,400.

As time passes and Bitcoin becomes more scarce, Marathon Digital and Riot’s impressive hash rates (23.3 EH/s and 12.8 EH/s, respectively) should become increasingly valuable.


Demand for Bitcoin investment vehicles is high, particularly in the US since Bitcoin’s exchange-traded fund market is immature. Over the next 3 – 5 years, institutional demand for Bitcoin and Bitcoin-based companies should increase as a result of:

  • muted expected stock market returns
  • high stock valuations
  • historically low interest rates
  • Federal Reserve tightening
  • consistently high inflation
  • elevated volatility

While this news is bearish for the overall market, it is bullish for uncorrelated and consistently profitable Bitcoin miners.

Going forward, I expect the entire Bitcoin mining sector to perform well. Marathon Digital and Riot Blockchain are poised for rapid expansion and huge profits through 2022. This growth, paired with a bleak outlook for equities makes MARA and RIOT looked undervalued at today’s prices.

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