Bitcoin and the Public Markets, 3/21/2022: Valuation Focus: Bitcoin Miners Look Rich Compared to Future BTC Mined vs. Similar Oil & Gold Metrics

3 min readMar 28, 2022

Our last Weekly Hash drew attention to our projected growth in network Hashrate as well as daily revenue per PH/s in BTC terms, given our (possibly slightly optimistic) projections for growth in transaction (Tx) fees. Note that long term Hashrate growth is dependent on price appreciation driving adequate revenue per MWh of mining computing power to keep mining sustainable. Please click here for the full version of this report.

This report focuses on the valuation implications of the network Hashrate for the public miners. Inside the report, we do cover our regular sections: macro markets, fund flows and CME positioning, but the focus is on public miners.

By our assessment, a Petahash/s of hashing capacity is projected to mine 1.424BTC in 2022, and 0.808BTC in 2023 (slide 6). From 1/1/2023 through 12/31/2030, our model projects 1PH/s to mine a total of 2.129BTC. 2023 represents ~38% of this 2.129 BTC, in part because of the impact of the 2024 halving.

Commodity extracting industries, such as oil & gas and gold miners, trade at an EV / unit of reserve. The EV of Exxon Mobil, for example, is compared to the proven reserves in barrels of oil equivalent, or EV per oz of proven gold reserve in the case of gold miners. The oil group trades at an EV of $25 per BoE, or 22% of the current spot price of oil, while the gold group trades at $733 per oz gold reserves, or 38% of spot. The notion is that as an investor, I can buy 1 oz of gold or invest in the company to own 1 oz of future gold. The reason 1 oz equivalent of the company is cheaper than spot is because there are operating costs and future capital expenditures required to extract that gold.

We view an investment in a Bitcoin miner similarly: an investment in the miner gives us a proportional share of future bitcoin mined, with the need to account for future operating expenses to run the miners as well as “sustaining capex”, the capex needed to support and upgrade the existing Hashrate. Thus, the price an investor should be willing to pay to own 1 Bitcoin “in the ether” by proxy through stock ownership should be less than the spot price of Bitcoin by the opex and capex required to mine it, with an additional time value component as well. For every Bitcoin that a miner will mine over the years, the valuation should be a modest fraction of the current spot price of BTC.

The 18 publicly listed mining stocks trade at an average adjusted Enterprise Value per YE 2022 PH/s of planned capacity of $110k, up $20k WoW. We adjust based on balance sheet crypto holdings. Adjusted EV = Market Cap + Debt — Cash — Market Value of Crypto Holdings. We also examined financials based on Bloomberg analyst consensus, finding that the companies that do have estimates trade at 3.7x 2022E EBITDA and 6.8x 2022E Contribution (Gross Profit + Depreciation). Consensus estimates (slide 17) call for $3B in EBITDA (11/18 miners) on ~$4.7B in revenue (estimates on 13/18 miners). Considering our 327EH/s year end network Hashrate estimate, we suspect that consensus EBITDA estimates may need downward revisions unless Bitcoin price accelerates to new highs.

Key Takeaways

Bitcoin miners trade at an adjusted EV per BTC in reserve of $39,676, a small discount to the $41,095 spot price

We assess that Bitcoin miners as a group should be trading at a much more significant discount to the spot price of BTC than the ~4% the group currently exhibits

We would expect differences in business models, cost structures, capitalization and alternate revenue streams to account for some the valuation variance within the group




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