The world of Bitcoin mining is evolving rapidly, and as new data emerges, it appears that not all players in this industry are created equal. In a recent analysis, Jaran Mellerud, a Bitcoin mining expert and founder of MinerMetrics, has drawn attention to the valuation discrepancies that exist within the sector. According to Mellerud, two major players, Marathon Digital and Riot Blockchain, are currently among the most overvalued crypto mining companies when compared to their peers.
Mellerud’s assertion is primarily based on a critical metric known as the enterprise value-to-sales (EV/S) ratio, which measures a company’s value in relation to its sales revenue. The higher this ratio, the more overvalued the company is perceived to be. The report, published on November 3, reveals that Cipher boasts the highest EV/S ratio at 7.8, closely followed by Marathon and Iris Energy, both with ratios of 5.6, and Riot, with an EV/S ratio of 5.5. These figures serve as a stark reminder of the overvaluation concerns raised by Mellerud.
One significant factor contributing to the elevated EV/S ratios of Marathon and Riot is their strong attraction of institutional investors, including heavyweight names like BlackRock and Vanguard. Historically, these two companies have been favorites among such investors, granting them unparalleled access to capital and leading to the higher valuations that they currently enjoy, which further exacerbates their overvaluation.
Mellerud predicts a potential shift in investor preferences in the coming months, as they begin to explore other players in the market who offer better value propositions. This shift could help balance out the valuation discrepancies observed between these stocks. Mellerud suggests that there are numerous better-priced opportunities available in the Bitcoin mining sector, with lower EV/S ratios that can be strategically capitalized upon by value investors.
Riot’s High EV-to-Hashrate Ratio Sparks Concerns Over Overvaluation
Another indicator that Riot may be overvalued is its high EV-to-Hashrate ratio, which stands at 156. Mellerud believes that this ratio points toward Riot’s overvaluation, with “massive growth” priced into its shares as the company constructs a gigawatt site and anticipates the delivery of 33,000 MicroBT machines in early 2024. Furthermore, Riot’s multiple business lines are not adequately reflected in its self-mining hashrate, which necessitates caution when drawing any valuation conclusions based solely on its high EV-to-Hashrate ratio.
The overall performance of the Bitcoin mining sector in 2023 has been impressive, with Marathon and Riot leading the way, as evidenced by their respective share price increases of 170% and 228%, according to data from Google Finance. Remarkably, these mining stocks have outperformed Bitcoin itself, which has registered a 113% year-to-date gain, according to data from Cointelegraph Markets Pro.
However, not all analysts in the field share the same optimism about the future of Bitcoin mining stocks. Caleb Franzen, the founder of Cubic Analytics, believes that Bitcoin may have already reached its year-to-date peak price, while the top mining stocks are still over 75% off their year-to-date price highs. Franzen has raised concerns about the impending Bitcoin halving event, speculating whether mining firms will need to double their productivity to maintain sustainability in a post-halving scenario.
As of now, Marathon stands out with the largest Bitcoin holdings among mining companies, holding an impressive 13,726 BTC, which is valued at $486.1 million. Hut 8, Riot, and CleanSpark follow closely, with holdings of 9,366 BTC, 7,309 BTC, and 2,240 BTC, respectively.
NEAR Foundation Faces Controversy Over Alleged $11 Million USN Deal Breach
In a related development, a recent controversy involving the NEAR Foundation and Aurora has captured attention. Wintermute, a prominent player in the cryptocurrency space, has accused NEAR of reneging on an agreement to convert $11 million worth of its stablecoin, USN. Wintermute’s founder and CEO, Evgeny Gaevoy, alleges that NEAR refused to honor their commitment to facilitate the sale of $11.2 million worth of USN for the FTX estate. Wintermute had worked closely with FTX to liquidate its assets for creditors, including the sale of $11.2 million worth of USN.
Gaevoy claims that Wintermute executed the transaction on the understanding that USN could be redeemed for USDT on a one-to-one basis. However, NEAR allegedly did not honor their commitments, leaving Wintermute without any USDT even after two and a half months.
Wintermute Threatens Legal Action
Wintermute’s final offer of 20% of the $11 million was unsatisfactory, leading Gaevoy to express his intent to pursue legal action against NEAR and Aurora. He referred to his post as a “last and public attempt” to urge the NEAR Foundation to fulfill the redemption, warning that if the situation remained unresolved, Wintermute was fully prepared to adopt an adversarial stance.
As of now, NEAR Foundation and Aurora have not issued any official response to the allegations. The situation underscores the complexities and challenges that can arise within the cryptocurrency industry, even among major players in the space.
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