Bitcoin Mining Stocks: Uncovering the Difference Between Web 1.0, 2.0, 3.0 and 4.0

Marathon Digital and Riot Platforms Among Most Overvalued Crypto Mining Companies

MinerMetrics founder and analyst Jaran Mellerud claims that Bitcoin (BTC) mining heavyweights Marathon Digital and Riot Platforms are among the most overvalued crypto mining companies relative to their competitors, as indicated by their enterprise value-to-sales ratio.

The enterprise value-to-sales ratio is a key metric used to measure a company’s value relative to its sales revenue, with the higher the ratio indicating a more overvalued company. According to a Nov. 3 report by Mellerud, the miners with the highest EV/S ratios are Cipher at 7.8, Marathon and Iris Energy each at 5.6 and Riot at 5.5.

Mellerud attributes the heavyweight’s high EV/S ratios to receiving more institutional attention from the likes of BlackRock.

Investment Opportunities with Lower EV/S Ratios

Mellerud, formerly an analyst at Bitcoin miner Luxor Technology, told Cointelegraph that in the upcoming months, investors may start to allocate to other players, which could equalize the valuation discrepancies between stocks. He indicated that there are better-priced opportunities with lower EV/S ratios that could be capitalized on.

Riot’s high EV-to-Hashrate ratio of 156 is another sign of its overvaluation, according to Mellerud. He noted that the company has “massive growth” priced in, as it is constructing a gigawatt site and awaiting the delivery of 33,000 MicroBT machines in early 2024.

Bitcoin Mining Sector Rebounding

The Bitcoin mining sector has seen a strong rebound in 2023, with Marathon (MARA) and Riot (RIOT) leading the way, with share prices increasing by 170% and 228% respectively, according to Google Finance.

The mining stocks have outperformed Bitcoin over the same period, which has gained 113% year-to-date, as reported by Cointelegraph Markets Pro data.

However, not everyone in the mining industry is convinced that the increase in Bitcoin mining stocks will continue. In addition, Riot’s self-mining hashrate does not reflect its other business lines, meaning that caution should be taken when drawing any valuation conclusions from its high EV-to-Hashrate ratio, according to Mellerud.

Bitcoin Halving Event and Mining Companies

Caleb Franzen, founder of Cubic Analytics, has observed that Bitcoin has already reached its year-to-date peak price, while the top mining stocks are still over 75% off year-to-date price highs.

He has also considered the impact of the upcoming Bitcoin halving event, and whether Bitcoin mining firms will need to become twice as productive.

Marathon has the largest Bitcoin holdings among mining companies, with 13,726 BTC, worth $486.1 million. Hut 8, Riot and CleanSpark follow with respective holdings of 9,366 BTC, 7,309 BTC and 2,240 BTC.