Marathon, Riot among most overvalued Bitcoin mining stocks: Report

Bitcoin (BTC) mining heavyweights Marathon Digital and Riot Platforms are amongst the most misestimated crypto mining companies relative to their rivals, states MinerMetrics founder and analyst Jaran Mellerud.The crucial metric backing Melleruds claim is enterprise value-to-sales ratio– measuring a businesss worth to its sales revenue. The greater the ratio, the more misestimated a business is.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, according to a Nov. 3 report by Mellerud.Mining stocks appraisal in terms of EV-to-Sales ratio. Source: MinerMetricsMellerud attributed the heavyweights high EV/S ratios to receiving more institutional attention from the likes of BlackRock.” These companies have traditionally been preferred among institutional investors like Blackrock and Vanguard, providing superior access to capital and higher valuations like the rest of the market.” Mellerud told Cointelegraph in the coming months he expects investors to begin designating to other gamers “which could even out the valuation discrepancies between these stocks,” he said.He recommended there are better-priced opportunities with lower EV/S ratios that might be profited from.” There exist immense evaluation inconsistencies in the Bitcoin mining sector that worth financiers can take benefit of.” Riots high EV-to-Hashrate ratio at 156 is another indication pointing towards its overvaluation, states Mellerud.Mining stocks appraisal in regards to EV-to-Hashrate ratio. Source: MinerMetricsMellerud, formerly an expert at Bitcoin miner Luxor Technology, noted Riot has “massive growth” priced in as its building its a gigawatt website and awaits the shipment of 33,000 MicroBT machines in early 2024.” In addition, Riot has numerous service lines that are not shown in its self-mining hashrate, meaning we should take care in drawing any assessment conclusions from its high EV-to-Hashrate ratio,” Mellerud added.The Bitcoin mining sector has rebounded strongly in 2023, led by Marathon (MARA) and Riot (RIOT), whose share prices have actually respectively increased 170% and 228%, according to Google Finance.The mining stocks have actually outshined Bitcoin over the very same time, which has gotten 113% year-to-date according to Cointelegraph Markets Pro data.Related: Bitcoin mining can assist decrease up to 8% of global emissions: Report Not every mining expert believes Bitcoin mining stocks will continue to rise.Cubic Analytics founder Caleb Franzen noted Bitcoin currently reached its year-to-date peak cost, while the top mining stocks are still over 75% off year-to-date price highs.Franzen thought about whether Bitcoin mining companies will quickly require to become twice as efficient in light of the upcoming Bitcoin cutting in half event.” If block rewards are cut in half, the price of BTC would require to double post-halving in order for their organization to be simply as sustainable as it was pre-halving.” Marathon has the biggest Bitcoin holdings amongst mining companies with 13,726 BTC, worth $486.1 million. Hut 8, Riot and CleanSpark follow with particular holdings of 9,366 BTC, 7,309 BTC and 2,240 BTC.Magazine: How to safeguard your crypto in a volatile market: Bitcoin OGs and professionals weigh

Other Questions People Ask

What makes Marathon and Riot among the most overvalued Bitcoin mining stocks?

Marathon and Riot are considered overvalued due to their high enterprise value-to-sales (EV/S) ratios, which are significantly greater than their competitors. According to MinerMetrics founder Jaran Mellerud, both companies have an EV/S ratio of 5.6 and 5.5, respectively, indicating that they are misestimated relative to their sales revenue. This overvaluation is attributed to the increased institutional interest from firms like BlackRock, which has historically favored these companies.

How does the EV-to-Hashrate ratio indicate overvaluation in Bitcoin mining stocks like Riot?

The EV-to-Hashrate ratio is a crucial metric that reflects the valuation of Bitcoin mining companies in relation to their mining power. Riot's high EV-to-Hashrate ratio of 156 suggests that investors are pricing in significant future growth, which may not be justified by its current operational metrics. Mellerud warns that this ratio should be interpreted cautiously, as Riot has multiple service lines not fully represented in its self-mining hashrate.

What are the implications of the upcoming Bitcoin halving event for Marathon and Riot?

The upcoming Bitcoin halving event poses a significant challenge for Marathon and Riot, as it may require these companies to double their efficiency to maintain sustainability. Analyst Caleb Franzen highlights that if block rewards are halved, the price of Bitcoin would need to double post-halving for these mining operations to remain viable. This situation could lead to increased scrutiny of their valuations and operational strategies in the near future.

What opportunities exist for investors in the Bitcoin mining sector beyond Marathon and Riot?

Investors looking for better-priced opportunities in the Bitcoin mining sector should consider companies with lower EV/S ratios, as suggested by Jaran Mellerud. He points out that there are significant valuation inconsistencies within the sector that savvy investors can exploit. By diversifying into less overvalued stocks, investors may find more sustainable growth potential compared to the high-flying valuations of Marathon and Riot.

How have Marathon and Riot performed compared to Bitcoin in 2023?

In 2023, Marathon and Riot have significantly outperformed Bitcoin, with share prices increasing by 170% and 228%, respectively. This performance contrasts with Bitcoin's year-to-date increase of 113%, indicating that mining stocks have attracted more investor interest during this period. However, analysts caution that despite these gains, both companies remain overvalued based on their current financial metrics.