Are Bitcoin Mining Stocks Mispriced? On-Chain Metrics Investors Should Know

The on-chain analytics platform CryptoQuant has developed a framework that helps track the revenue of major public Bitcoin mining companies, offering valuable insights into whether these companies are mispriced in real-time.

In its latest weekly report, CryptoQuant reveals how its methodology tracks mining addresses on the Bitcoin blockchain and measures BTC production, providing analysts with revenue data that is not typically disclosed by these companies through traditional financial reports.

Valuation Framework for Bitcoin Mining Companies

CryptoQuant’s framework includes several leading Bitcoin miners such as Marathon Digital (MARA), Riot Blockchain (RIOT), and Core Scientific (CORZ). It also covers Hive Digital Technologies (HIVE), CleanSpark (CLSK), Bitfarms (BITF), TeraWulf Inc. (WULF), Cipher Mining (CIPHER), and IREN (IREN), formerly known as Iris Energy.

The framework tracks daily revenue generated from block rewards and transaction fees, which are then annualized and compared to the mining companies’ market capitalization. This comparison results in a key metric called the Market Cap to Annualized Daily Revenues (MCAR) ratio. This ratio helps investors determine if a miner’s Bitcoin production or USD-denominated revenue justifies its current market valuation.

How the MCAR Ratio Reveals Mispricing

The MCAR ratio gives investors an easy way to spot whether a mining company is undervalued or overvalued in real-time. By assessing the market capitalization relative to revenue generation, investors can make better-informed decisions on which Bitcoin miners to include in their portfolios. The goal is to favor companies whose market valuations lag behind their revenue generation and avoid those trading at inflated prices.

WULF and MARA: Priced at a Premium

According to CryptoQuant, Bitcoin miners WULF and MARA currently have the highest MCAR ratios, standing at 5.1 and 4.4, respectively. These high ratios suggest that these companies are priced at a premium compared to their actual revenue. On the other hand, miners like RIOT, CLSK, and HIVE show more balanced valuations that align more closely with their actual revenue generation.

IREN: Potentially Undervalued

Interestingly, IREN stands out with the lowest MCAR ratio, signaling that it may be undervalued by the market, despite posting impressive growth in BTC production. This creates a potential opportunity for investors, as IREN could see a repricing if the market begins to recognize its operational strength.

CryptoQuant notes that this valuation dispersion presents an opportunity for investors to apply relative value strategies, identifying companies like IREN that could be undervalued compared to their market performance.