Marathon Digital's Industry-Leading Operation Efficiency Risks Overcentralization

SummaryMARA presents severe operation risks by locating 62% of its mining operations in one state should an extreme natural event, grid energization issues, or adverse change in state policy occur.MARA is not expected to halt mining operation under our Bitcoin worst-case scenario as MARA's mining cost and all-in business cost are competitive and unrivalled among comps.MARA can justify a 275% upside if Bitcoin reclaims ATH but Bitcoin would also return 250%, hence we find the additional 25% return unappealing due to additional operation/business risks.We iterate our stance to choose Bitcoin over MARA.IntroductionIn our previous coverage, we cautioned investors against Marathon Digital Holdings (MARA) due to its outsized management stock-based compensation ('SBC') expenses. In this article, we turn our attention to another undercovered risk that could render MARA's impressive 2024 23 EH/s expansion efforts unmeaningful.The one-off event (a huge storm) in Montana caused a 50% decline in its Q2 and Q3 Bitcoin (BTC-USD) production and prompted us to reconsider one of MARA's major operation risks. That risk is its largely centralized operations in Texas.Potential Future Mining Woes In TexasAccording to Table 1, Texas will become one of MARA's primary Bitcoin mining locations. By the end of the MARA's 23 EH/s expansion plans, 4 out of 8 sites will be positioned in Texas where 62% of MARA's targeted 23 EH/s capacity will be situated i...