According to recent market segments, opportunities in the market have grown, and market experts anticipate developments that could even out valuation discrepancies between mining stocks. This comes in as a “better price opportunity that could assist in mitigating various hiccups ...
According to recent market segments, opportunities in the market have grown, and market experts anticipate developments that could even out valuation discrepancies between mining stocks. This comes in as a “better price opportunity that could assist in mitigating various hiccups in the industry.
Currently, a new listing shows digital mining heavyweights that have topped the market, and they include Riot and Marathon Digital.
The two are among the most overvalued digital currency mining platforms as compared to their competitors. Moreover, the hype behind these platforms has been realized due to various factors, and Jaran Mellerud has commented on a review of this development by Marathon and Riot Platforms.
Marathon’s and Riot’s hype over BTC mining stock
Jaran Mellerud, the MinerMetrics founder, shared his review on the overvalued nature of mining stocks, including Riot and Marathon Digital platforms. Marathon records a holding of 13,726 BTC worth $485.1 million, while Riot holds 7,309 BTC. Mellerud commented:
Bitcoin mining heavyweights Marathon Digital and Riot Platforms are among the most overvalued crypto mining companies relative to their competitors.
Jaran Mellerud
The basis of this review is on the value-to-sales ratio, which is used to measure an organization’s revenue and conclude its overall value in the market. Additionally, when the ratio value is high, this implies that a company is overvalued.
Mellerud rooted comments followed this metric and discovered that the two big crypto mining players were indeed overvalued.
According to Mellerud’s report on November 3, among the miners with the highest EV/S ratio include Riot, with a 5.5 ratio, and Marathon Digital, with 5.6. Other players also topped the list, with Cipher having a 7.8 ratio while Iris Energy also recorded a 5.6 ratio.
Mellerud also commented, attributing these developments to a likelihood of these mining stocks reducing more attention from institutional investors, including BlackRock. The MinerMetrics founder said:
These companies have historically been favored among institutional investors like Blackrock and Vanguard, giving them superior access to capital and higher valuations like the rest of the industry.
Jaran Mellerud
Mellerud also stated that in the coming months, an allocation of investors is expected for other players. He added, “which could even out the valuation discrepancies between these stocks.”
His highlight suggests a better-price opportunity awaits with lower EV/S ratios that can be capitalized on and realize substantial returns. He also added that:
There exist immense valuation discrepancies in the Bitcoin mining sector that value investors can take advantage of.
Influence of the overvalued mining stocks
The ex-analyst at Luxor Technology Bitcoin miner firm noted that Riot has witnessed a “huge growth” in its market value. Riot expects to continue its construction of gigawatt sites that will deliver over 33,000 MicroBT machines as early as 2024, just two months from now. He added:
In addition, Riot has several business lines that are not reflected in its self-mining hash rate, meaning we should be careful in drawing any valuation conclusions from its high EV-to-Hashrate ratio.
Crypto analyst
According to Google Finance, the rebound of Bitcoin mining has been strong in 2023, and Riot led the list with a 228% increase in price. Marathon (MARA) followed with a 170% increase. Also, these mining stocks have been seen to outperform Bitcoin (BTC) during the same period. BTC records a 113% gain year-to-date.
However, not all mining stocks of BTC will have a yield increase. Caleb Franzen, Cubic Analytics founder, weighs in on this and notes that Bitcoin has already reached its peak year-to-date price.
The top mining firms are still at 75% over their year-to-date highs. As the Bitcoin halving event is expected next year, these mining firms will have to put in more work, Franzen commented.
He added, “If block rewards are cut in half, the price of BTC would need to double post-halving in order for their business to be just as sustainable as it was pre-halving.”