11 Apr 2022

How is the market valuing the public bitcoin miners?

Different growth expectations lead to considerable differences in how public mining companies are valued.
Source: Yahoo Finance, March production updates (Marathon, Riot, Hut 8, Core Scientific, Bitfarms)
We can compare the valuations of mining companies using the industry metric Price/Hashrate. A miner’s hashrate is their capacity to produce bitcoin. Therefore, Price/Hashrate considers future earnings, and we can view the metric as a simplified version of the Forward Price/Earnings ratio.The most expensive mining stock based on Price/Hashrate is Marathon. Investors are pricing in massive future hashrate growth, as the company has enormous machine orders waiting to be plugged in.The market also expects Riot to grow fast, but unlike Marathon, which only owns ASICs, Riot owns a massive facility that they are expanding on.Of the top 5 miners by production volume, Bitfarms’ current operating hashrate is priced the lowest, as the market is not expecting them to grow that fast.Investors should also remember that if a miner has lower costs than others and therefore can generate hashrate at a lower price, their hashrate should be valued higher than that of miners with higher costs. In this article, we outline the power prices paid by the different mining companies, and we see that Bitfarms is on the upper part of the cost curve, which naturally impacts their valuation.
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