Better Bitcoin Mining Stock: Riot or Marathon?

In a crowded field, Riot Blockchain (NASDAQ: RIOT) and Marathon Digital (NASDAQ: MARA) have risen to become leaders in the competitive Bitcoin mining industry. While both have found success, they have done so in vastly different ways. But only one is set up for more promised long-term success: Riot.

Here’s why Riot’s mining strategy will prove to be more conducive to finding profits as Bitcoin becomes more scarce over the coming years.

Image source: Getty Images.

The impact of the “halving”

In mid-April, Bitcoin will undergo its fourth halving. Occurring roughly every four years, the halving is a mechanism built into Bitcoin’s code that reduces the reward distributed to miners by half. Today, miners earn a generous 6.25 Bitcoins for every block mined. But in just a couple of months, compensation will fall to just 3.125 Bitcoins.

While many Bitcoin investors are looking forward to the halving due to what has happened to Bitcoin’s price after previous halvings, miners are likely less enthusiastic. With each halving, miners face a cruel reality where their revenue is effectively cut in half. The Bitcoin mining industry is already competitive, and the halving raises the stakes and shrinks the margin of error.

So, to properly evaluate Riot and Marathon, we must do so from the perspective of after the halving. From this angle, Riot’s true potential begins to shine.

The tale of the tape

At first glance, Marathon looks like the better investment. During 2023, it mined more than 12,800 Bitcoins, good enough for second place among all miners. It also grew its mining capacity, measured in exahashes per second (EH/s), to an industry-leading 26.4 EH/s. Riot, on the other hand, generated 6,616 Bitcoins with its hash rate of 12.4 EH/s.

That means Marathon is roughly twice as productive as Riot. Presumably, this would mean Marathon is better suited to find success post-halving. But this assumption only accounts for half of the picture.

While production is important, efficiency is what really matters. A miner can generate more Bitcoins, but if it does so at high costs, then profitability becomes more difficult to find, especially once…

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