Bitcoin's (BTC 1.03%) price has surged more than 30% over the past month for two main reasons. First, BlackRock's (BLK -0.42%) proposed Bitcoin exchange-traded fund (ETF) briefly appeared on a clearing house eligibility list, which suggested it might be making gradual progress toward a regulatory approval. If approved, BlackRock's Bitcoin ETF would be the first ETF to be pinned to Bitcoin's spot price, which would set it apart other Bitcoin ETFs which are currently tethered to Bitcoin futures.

Second, the escalating Middle East conflict has been driving investors toward safe haven assets like gold again. Bitcoin is still more volatile than gold, but it could be lumped together with the precious metal as more investors pivot away from fiat currencies while inflation, high interest rates, and global turmoil rattle the global markets.

Therefore, it wasn't surprising to see shares of Marathon Digital (MARA -4.98%) and Riot Platforms (RIOT -3.28%), the two biggest pure-play Bitcoin miners in the world, rally about 11% and 14%, respectively, over the last month. But should investors buy either of these stocks as a long-term play on Bitcoin's growth?

The differences between Marathon and Digital

Marathon and Riot were both once tiny patent holding companies which abruptly reinvented themselves as Bitcoin miners. Riot, which was formerly known as Bioptix, made that leap in 2017, and Marathon followed that example in 2020. Both companies then ordered tens of thousands of top-tier Antminer mining systems from Bitmain.

Many investors initially dismissed those rebrandings as cheap attempts to cash in on the market hype about Bitcoin. Yet both companies eventually grew their mining operations into sustainable businesses.

Riot had deployed 98,694 miners by the end of September, which gave it a total hash rate capacity (the overall efficiency of its mining operations) of 10.9 EH/s (exahashes per second). It produced an average of 12.1 BTC daily during the month. Marathon has deployed 155,910 miners as of this writing, which gives it a much higher total hash rate capacity of 23.1 EH/s. It was producing an average of 41.1 BTC daily at the end of September.

Similar headwinds and tailwinds

Both companies faced tough headwinds over the summer as Bitcoin prices slumped while inflation and adverse weather conditions caused energy prices to soar. However, Riot and Marathon both started to grow their average daily BTC production again on a monthly basis in September as Bitcoin's price rose and energy prices stabilized.

Data source: Company press releases.

Both companies also liquidated some of their own BTC holdings to raise fresh cash over the past year. In September, Riot sold 340 of its mined BTC while Marathon sold 800 BTC. Those ongoing sales should provide both companies with a stable flow of cash to purchase even more miners and scale up their operations.

At the end of the third quarter of 2023, Riot held $289 million in cash and $221 million in BTC on its balance sheet. Marathon held $114 million in cash and $380 million in BTC.

Both companies should have enough capital to ride out their near-term losses. Analysts expect Riot's revenue to rise 22% to $318 million this year as it narrows its net loss from $510 million to $169 million. They expect Marathon's revenue to surge 210% to $366 million (mainly driven by the opening of two new plants and a new joint venture in Abu Dhabi) as it narrows it net loss from $687 million to $61 million.

Marathon seems like the larger and stronger miner, but it has two notable weaknesses. First, it still faces an Securities and Exchange Commission (SEC) probe regarding its joint venture with Beowulf Energy to secure favorable energy rates. Second, its debt-to-equity ratio of 1.2 is much higher than Riot's ratio of 0.1.

The better buy: Marathon Digital

Both stocks have similar valuations: Riot trades at nearly seven times this year's sales, while Marathon trades at about six times this year's sales.

I'm not bullish on either of these stocks right now, since I believe it makes more sense to simply buy Bitcoin instead of investing in these capital-intensive miners. But if I had to choose one over the other, I'd pick Marathon because it's bigger, produces more Bitcoins every day, and has a much shorter and clearer path toward profitability.