Amid the chaos of recent trading sessions on Wall Street, blockchain-mining specialist Marathon Digital (US:MARA) has provided stakeholders with a modicum of relief. Earlier Monday morning, Marathon’s leadership team revealed that its funds were held at Signature Bank (US:SBNY), which failed over the weekend. Fortunately for stakeholders, the cryptocurrency miner revealed that its funds were secure and available for use.
Marathon dodged a bullet. Prior to federal regulators stepping in to take over Signature Bank and Silicon Valley Bank (US:SIVB), several market observers feared that the failure of the aforementioned financial institutions could wipe out a generation of startups, NPR reported. By sidestepping this catastrophic scenario, investors dramatically bid up MARA stock. In afternoon trading yesterday, shares bounced up near 26% against the prior session’s close.
As well, the underlying crypto market enjoyed a significant skyward leap on Monday. Buoyed by governmental support, CNBC reported that the total market capitalization of all blockchain-derived digital assets jumped above the $1 trillion mark. As Fintel contributor Robert Lakin noted, the Federal Deposit Insurance Corp. (FDIC) took over both Silicon Valley and Signature.
Nevertheless, MARA stock still faces mounting challenges. For one thing, Marathon shares remain deeply distressed against the trailing-year, shedding about 69% of equity value. Moreover, the company suffers from eroding strengths in its balance sheet. In particular, it held long-term debt of $728.4 million at the end of 2021.
To be fair, Marathon held $268.5 million of cash and cash equivalents at carrying value at the same time. However, as of the third quarter of 2022, this metric slipped to $55.3 million. As well, the digital currencies — Bitcoin and the like — that Marathon had on its books fell in value due to the crypto fallout of last year.
Moving forward, all eyes will likely focus on the Federal Reserve. According to Fed Chair Jerome Powell’s monetary policy speech held last year at an economic symposium at Jackson Hole, Wyoming, the policymaker stressed the importance of controlling inflation as “…a failure to restore price stability would mean far greater pain” down the line.
Of course, this is the same Fed chairman who last week told lawmakers on Capitol Hill that while the central bank intends to promote innovation, regulated financial institutions should exercise “great care” while participating in the crypto industry due to the high incidence of fraud and lack of transparency within the sector.
Then, in response to a question during his appearance before a House Financial Services Committee hearing, he said that he has never “understood the valuation” of cryptocurrencies.
But back to policy. Buttressing the financial system with dovish tactics would likely exacerbate historically elevated inflation. On the other hand, continuing to tighten the money supply amid bank failures may spark a recession. With no easy decisions available, MARA stock remains a risky proposition for investors.
This article originally appeared on Fintel
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