Crypto Mining Stocks are Overvalued: JP Morgan
According to JP Morgan, publicly traded Bitcoin miners are currently trading at high valuations compared to their remaining Bitcoin reserves. Let’s dive into the details:
Market Cap vs. Actual Bitcoin Reserves
- JP Morgan compared the performance of 14 U.S.-listed Bitcoin miners and found that their aggregate market cap increased by 29% in just two weeks.
- Despite the rise in market cap, the analysis revealed that the miners’ projected future BTC earnings are significantly lower than their current market valuations.
Recent Performances of Leading Miners
- Cipher Mining (CIFR) saw the best performance with a 44% increase, while Stronghold Digital (SDIG) dropped by 8%.
- All miners in the group outperformed Bitcoin’s price appreciation over the same period.
Potential Factors Affecting Miner Performance
- Miners earn revenue in BTC, making their stock performance closely tied to the digital currency’s price movements.
- Other factors such as energy efficiency, competition, and Bitcoin halving events can influence their operations and profitability.
Industry Competition and Hash Rate
- Since the latest halving, Bitcoin’s total hash rate has dropped by about 60 exahashes per second.
- Public miners have been expanding their capacity, reaching a record cumulative hash rate, indicating industry efficiency.
Market Cap Discrepancy
- The market cap of the 14 largest U.S.-listed miners is currently 131% larger than their relative share of the remaining Bitcoin supply.
- This ratio is significantly higher compared to the average since January 2022, indicating overvaluation.
Bitcoin Mining Profitability
- The “hashprice” measure of Bitcoin mining profitability has declined by over 50% since pre-halving levels, impacting miners’ earnings.
Top Miners in June
- In June, Hive Digital (HIVE) and Bitfarms (BITF) were the top miners in terms of BTC mined per unit hash rate deployed.
Hot Take: Proceed with Caution
Considering the discrepancies between market valuations and actual BTC reserves, investors should exercise caution when investing in publicly traded Bitcoin mining stocks.
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