Why Buying Bitcoin Directly Is Better to Invest in Crypto Mining Stocks, Based on This Valuation Model

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Thinking of ways to gain exposure to bitcoin as prices rise?

BTCUSD bitcoin shares,
+0.24%
miners are too high compared to outright possession of cryptocurrency, according to Sam Doctor, chief strategy officer at digital asset financial services platform BitOoda.

In the commodity mining industry, investors could calculate a miner’s enterprise value per unit of reserve and compare it to the spot price of the commodity. The former should be lower, as miners have to bear the operating and capital expenses. For example, major oil companies trade on average at $25 a barrel of oil, or 23% of the current CL00 oil spot price,
+0.70%,
while major gold miners are trading at an average of $737 per ounce GC00 gold,
+0.58%
reserves, or 38% of the price of the metal.

The same framework can also be applied to crypto mining, according to Doctor. According to the BitOoda report, public bitcoin miners trade on average at an adjusted enterprise value per bitcoin in reserve of $47,872, or 96% of bitcoin’s recent spot price of $47,700. Its ratio (see chart) is much higher than in the oil or gold industries, Doctor noted.

BitOoda


“If miners are already highly valued, if their enterprise value per bitcoin they will mine is already almost the same as the spot price of bitcoin, then there is no margin for error,” he said. Doctor at MarketWatch during a phone interview.

“Equities will do well if [bitcoin] the price goes up. But from that mining reserve, miners have to pay for electricity, people, and they have to pay to replace machinery as new generations come out,” Doctor said.

Bitcoin was recently trading at around $47,486, up 0.4% in the past 24 hours and up 13% in the past seven days, according to data from CoinDesk.

“We would rather own spot bitcoin than own bitcoin miners as a group, and
selectively view opportunities in low-value stocks and/or diversified stocks,” according to Doctor.

Enterprise value/bitcoin reserve of bitcoin miner

BitOoda

For individual bitcoin miners, Marathon Digital Holdings’ MARA,
-0.42%
the company’s value against bitcoin’s stash is $53,919, or 113% of bitcoin’s recent price, according to the report. Shares of the company closed at $30.91 on Tuesday, down 0.7%. Digihost DGHI,
-1.30%it’s
the company’s value to bitcoin reserves is around $4,275, or 90% of bitcoin’s recent price, while its shares closed down 5% at $3.61.

The Dow Jones industrial DJIA,
+0.97%
The average ended up 1% on Tuesday at 35,294.19.

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