Marathon Digital Holdings and Riot Platforms are two bitcoin mining stocks that have had similar stock price performances on a year-to-date basis but have differed in their performance over the last 12 months. Marathon Digital is down 20.4% over the past year, while Riot Platforms is up 33%. In order to determine which stock is better, it is important to look at their valuations and metrics specific to the bitcoin mining industry.
Two important metrics to consider for bitcoin miners are the realized hash rate and the price-to-hash ratio (P/H). The hash rate measures how long it takes a company to finish mining one block, while the realized hash rate is based on a company’s monthly production, the total block rewards from the bitcoin network at a particular time, and the network’s average monthly hash rate. The higher a company’s hash rate, the more likely it is to solve a block and receive a bitcoin. The P/H ratio is comparable to the price-to-earnings ratio used to value other companies and indicates how much per share an investor is paying for a bitcoin miner to mine bitcoin for them.
Marathon Digital has a higher realized hash rate than any of the other top miners, but its high P/H ratio and the amount it spends to mine one bitcoin suggest a bearish view. In August, Marathon Digital’s realized hash rate came in at 14.34, and its P/H ratio was 233.3. Investors were paying more for Marathon Digital to mine one bitcoin compared to any other miner, indicating possible overvaluation. Additionally, Marathon Digital spends significantly more than most other leading miners to mine a single bitcoin.
On the other hand, Riot Platforms’ numbers look better than Marathon’s. In August, Riot Platforms had a realized hash rate of 14.13 and a P/H ratio of 136.8. Its implied cost of bitcoin production was also better than average. However, the recent stock price action suggests that the stock might not rise further from current levels, making a neutral view appropriate.
Overall, Marathon Digital seems overvalued and bearish, while Riot Platforms looks better with a neutral view. Marathon Digital is down 37.9% over the last month, indicating worse downward momentum compared to Riot. However, both stocks have high short interest, suggesting that a short squeeze cannot be ruled out in the future. Considering recent price action and valuations, Riot Platforms appears to be the better option between the two bitcoin mining stocks.
