Are Bitcoin Mining Stocks Underestimated? Insights from On-Chain Data for Investors

The on-chain analytics platform CryptoQuant has introduced a system for assessing the revenues of top publicly traded Bitcoin mining firms. This approach provides insight into whether these companies are currently under or overvalued.

In its recent weekly report, CryptoQuant detailed how this system monitors miners’ wallets on the Bitcoin network along with their BTC output. This capability allows analysts to obtain revenue figures that aren’t typically revealed through standard corporate reporting.

The Valuation Framework

The Bitcoin mining firms analyzed through CryptoQuant’s system include Marathon Digital, Riot Blockchain, and Core Scientific. Additionally, the revenue figures for Hive Digital Technologies, CleanSpark, Bitfarms, TeraWulf Inc., Cipher Mining, and IREN, previously known as Iris Energy, were also tracked.

The report indicates that CryptoQuant analysts derived daily mining revenues from block rewards and transaction fees by monitoring miner addresses. These revenue estimates are then annualized and compared against the market capitalization of these mining firms. Subsequently, the analysts provide a predictive valuation framework akin to a price-to-sales ratio, referred to as the Market Cap to Annualized Daily Revenues (MCAR) ratio.

The MCAR ratio indicates whether a miner’s fundamental Bitcoin yield or USD-denominated income justifies the company’s valuation.

“By evaluating each company’s market capitalization in relation to its annualized daily revenue, investors can pinpoint potentially overvalued or undervalued firms. This facilitates more strategic portfolio management by favoring companies whose market values are lagging behind their revenue capabilities while minimizing exposure to those with inflated valuations,” CryptoQuant noted.

WULF and MARA Priced at Relative Premiums

According to CryptoQuant’s findings, the MCAR ratios for WULF, MARA, RIOT, CLSK, HIVE, and IREN are 5.1, 4.4, 3.7, 3.3, 1.9, and 1.8, respectively. These figures illustrate the amount investors are willing to pay for every dollar of projected annual revenue in real-time.

With the highest valuation multiples, WULF and MARA are believed by CryptoQuant to be significantly overvalued compared to their peers. On the other hand, RIOT, CLSK, and HIVE appear to be fairly valued, as their market valuations align closely with their revenue generation.

CryptoQuant also observed that IREN boasts the lowest valuation despite showing considerable growth in its BTC production, indicating it may be undervalued within the market. This presents an opportunity for potential upside if market perceptions shift.

“The current variance in valuations creates opportunities for strategies focused on relative value, enabling the identification of firms like IREN that may be underrecognized by the market despite strong operational performance,” the analytics firm commented.