Bitcoin Mining Giants Marathon and Riot Overvalued, Says Analyst; Future Market Shifts Expected
Summary:
Marathon Digital and Riot Platforms, prominent Bitcoin miners, are overvalued compared to their competitors, according to analysis by MinerMetrics founder Jaran Mellerud. The overvaluation encompassing industry leaders is linked to the interest of institutional investors, enabling greater access to capital. However, Mellerud anticipates this could balance out as investments diversify, and also earmarks several valuation disparities that could provide beneficial opportunities for investors. The Bitcoin mining industry, primarily Marathon and Riot, has robustly rebounded in 2023, overshadowing Bitcoin's own gains. Nevertheless, not all observers expect Bitcoin mining stocks to maintain this rising trend.
Bitcoin (BTC) miners Marathon Digital and Riot Platforms are identified as being overly expensive in comparison to other cryptocurrency mining businesses, as per analysis by MinerMetrics founder Jaran Mellerud. He bases this on the enterprise value-to-sales ratio, which evaluates a firm's value in relation to its sales. Firms with a higher ratio are considered overvalued. In a report published on November 3, Mellerud highlighted Cipher, Marathon, Iris Energy, and Riot as having the highest EV/S ratios.
This overvaluation is attributed to more institutional investors, such as BlackRock, showing interest in these companies. Mellerud explained that such interest provides these companies with better access to capital and consequently lifts their valuations above industry norms. However, Mellerud anticipates that investors will soon diversify their allocations, potentially evening out these stock valuations.
He also pointed out the industry's valuation discrepancies that could provide good opportunities for value investors, and noted that Riot’s high EV-to-Hashrate ratio of 156 signifies its overvaluation. The company, anticipating the delivery of 33,000 MicroBT machines in early 2024, has significant growth factored into its valuation. Mellerud cautioned that Riot's other business ventures are not reflected in its self-mining hashrate, making any valuation drawn from its high EV-to-Hashrate ratio potentially misleading.
The Bitcoin mining sector, with Marathon and Riot leading the charge, has bounced back in a big way in 2023. Both companies' respectively saw their share prices surge by 170% and 228%. This outpaced Bitcoin's own gain of 113% year-to-date.
However, not all analysts are optimistic about the continuous rise of Bitcoin mining stocks. Caleb Franzen, founder of Cubic Analytics, pointed out that top mining stocks remain over 75% off year-to-date price highs, even though Bitcoin has already peaked.
Franzen also warned that Bitcoin miners might have to double their productivity considering the forthcoming Bitcoin halving event. As of current standings, Marathon leads mining companies with the highest Bitcoin holdings of 13,726 BTC. Hut 8, Riot, and CleanSpark follow with holdings of 9,366 BTC, 7,309 BTC, and 2,240 BTC respectively.
Published At
11/8/2023 12:03:33 AM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.