Market boosts Marathon Digital stock above earnings.

Marathon Digital Holdings (NASDAQ:MARA) stock got a huge boost in Monday afternoon trading, with the stock rising 19%. But it’s all fun and games until someone gets hurt. Therefore, smart investors should consider the consequences of chasing the bull market in cryptocurrencies.

This is definitely not a call to short MARA stock. This is just asking for trouble at a time when stretched valuations could continue to expand. At the same time, Bitcoin (BTC-USD) believers may also pump the brakes when cryptocurrency mining stocks are on the rise for no apparent reason.

Advance profit event

Make no mistake about it. Bitcoin mining stocks are volatile assets and large price fluctuations are natural. It’s not uncommon for Marathon Digital stock to rise or fall more than 5% in a single day.

Unlike the various spot Bitcoin exchange-traded funds (ETFs) available today, MARA stock does not track Bitcoin price movements exactly. On some days, stocks magnify the ups and downs of cryptocurrencies, and many risk-taking traders are perfectly fine with this.

But Monday’s move was unusual. In fact, Bitcoin fell slightly on this day, hovering around $63,000. Meanwhile, as mentioned earlier, Marathon Digital stock was up 19% midway through the trading day.

Of course, MARA stock is a stock, so it may move depending on news in the stock market. Major stock market indices rose on Monday, but not unusually. In other words, this wasn’t a case of a stock market rally lifting Marathon Digital’s boat.

Moreover, we did not find a company-specific news catalyst. Marathon Digital’s first quarter earnings report and conference call are not scheduled to be held until May 9. However, it seems very likely that eager short-term stock traders will be looking ahead to the upcoming earnings event.

MARA stock isn’t necessarily a meme stock like GameStop (NYSE:GME) stock in 2021, but it does have meme-like characteristics due to its volatility and extremely devoted following. Interestingly, GameStop shares tumbled on Monday, showing that stock dumps often follow stock gains.

It’s a marathon, not a sprint

Serious investors should always keep in mind the difference between investing in news events and investing for the long term. The recent Bitcoin halving event is a good example of this difference.

Nimble traders who bought Bitcoin in anticipation of April’s halving may have reaped quick profits. On the other hand, investors who thought the halving would trigger a massive rally were clearly disappointed as the rally lost steam immediately after the halving.

In other words, smart investors should not base their long-term portfolio strategy on a single event. It’s in-depth research and big-picture thinking that will yield better returns over time.

In-depth research revealed several positive big-picture catalysts for Marathon Digital. This company is a top Bitcoin mining company with powerful equipment. Not long ago, Marathon Digital increased its fiscal 2024 hash rate target from 35-37 EH/s to a new target of 50 EH/s.

That’s a ton of hashing power and Marathon Digital is one of the most active Bitcoin miners. In April 2024, the company produced 850 Bitcoins, a 21% year-on-year increase compared to the 702 Bitcoins Marathon Digital produced in April 2023.

After Half-Life: What to Do Now?

At this point, prospective investors may be wondering whether miners like Marathon Digital will be able to sustain their current business model after the Bitcoin halving. In fact, the problem at Marathon Digital is that Bitcoin mining rewards have been reduced by half.

There are two solutions: The company needs to find ways to mine more Bitcoin and do so more efficiently. Moreover, the price of Bitcoin should rise, which Marathon Digital cannot control.

Meanwhile, there are upcoming earnings events to consider. Again, short-term traders can flip MARA stock for quick profits. On the other hand, long-term investors can easily tire out if they chase pre-earnings rallies.

The prudent approach is to wait for Marathon Digital’s revenue events to come and go. At least then you have more data to work with, and if the results are positive, you can invest in the company with justification rather than just hope.