Marathon, Riot Among Most Overvalued Bitcoin Mining Stocks: Report

Bitcoin (BTC) mining heavyweights Marathon Digital and Riot Platform are among the most overvalued crypto mining companies relative to their competitors, according to MinerMetrics founder and analyst Jaran Maillard.

A key metric that supports Maillard's claim is the enterprise value-to-sales ratio—a measurement of a company's value against its sales revenue. The higher the ratio, the more overvalued a company is.

Miners with the highest EV/S ratios are Cipher at 7.8, Marathon and Iris Energy at 5.6 each and Riot at 5.5, according to a November 3 report by Maillard.

Mellerud attributed the heavyweight's high EV/S ratio to institutional focus like BlackRock.

“These companies have historically been favored by institutional investors such as BlackRock and Vanguard, which allows them greater access to capital and higher valuations than the rest of the industry.”

Mellerrud told Cointelegraph in the coming months that he expects investors to start allocating to other players “which could even out the price differential between these stocks.”

He suggested that better value opportunities with lower EV/S ratios could be capitalized.

“In the Bitcoin mining sector, there are a lot of valuation differences that investors can take advantage of.”

Another indicator of Riot's high EV-to-Hashrate ratio at 156 is that it's overrated, according to Mellerud.

In the past, Bitcoin miner Luxor Technology's analyst Melrud Riot said there was “huge progress” in building the gigawatt space and that in 2018 It says it expects 33,000 MicroBT machines by early 2024.

“Furthermore, Riot has a number of business lines that are not reflected in its own mining hashrate, which means that we should be cautious about drawing any valuation conclusions from a high EV-to-hashrate ratio,” Maillard added.

According to Google Finance, the Bitcoin mining sector has rebounded strongly in 2023, led by Marathon (MARA) and Riot (RIOT).

Mining stocks have outperformed Bitcoin, which has gained 113% year-to-date over the same period, according to Cointelegraph Markets Pro data.

Related: Bitcoin Mining Could Help Reduce Global Emissions by Up to 8%: Report

Not every mining analyst believes that Bitcoin mining reserves will continue to increase.

Caleb Franzen, founder of Cubic Analytics, said Bitcoin has hit a year-to-date high, with top mining stocks still posting year-to-date price gains of more than 75%.

Franzen reckons that Bitcoin mining companies will soon need to become twice as productive in light of the upcoming Bitcoin halving event.

“If block rewards are halved, the price of BTC will need to double post-halving to make their trade sustainable, just as their trade was halved.”

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

Magazine: How to protect your crypto in a volatile market: Bitcoin OGs and experts weigh in.