BTC miners stocks: Which one would Warren Buffett pick?
11:15, 27 July 2022
Warren Buffett once famously called bitcoin ‘rat poison’ with ‘basically no value’, so he may not be rushing to buy BTC-linked stocks. But as some public BTC mining companies' valuations plummeted as much as 90% below their all-time highs, they could seem attractive to some value investors.
While the ‘Sage of Omaha’ himself would probably go nowhere near the sector, he famously chose value stocks - shares in strong companies he felt had fallen low enough to represent good long-term value: could any bitcoin miners fit this description?
Bitcoin (BTC) miners are deep in a bear market. But as the embattled firms are having to fight an adverse market environment, are they looking like good value and could now be a good time to buy them?
Jaran Mellerud, an analyst at Arcane Research, deep-dived into the publicly-listed miners' balance sheets and cash flows to pinpoint which ones are in the best position to come out on top at the end of this crypto market downturn. Which BTC miner stock is the bear market winner and which one is the bear market loser?
BTC to US Dollar
Several factors contributed to bitcoin miners' current plight: the price of BTC is now 69% down from its all-time high lowering the block reward; it takes increasing amounts of energy to mine a bitcoin, while the energy is increasingly expensive. Moreover, higher interest rates and lower investor demand means higher cost of capital, Mellerud lists in his report Survival of the fittest: Which public bitcoin miners are the best prepared to survive the bear market?
He examined cash flows and balance sheets of these publicly-traded BTC miners: CleanSpark (CLSK); Stronghold Diginatal Mining (SDIG); Argo Blockchain (ARNgb); Riot Blockchain (RIOT); Marathon Digital Holdings (MARA); Hut 8 Mining Corp. (HUT), Bitfarms (BITF) and Core Scientific (CORZ).
Who came on top?
What is your sentiment on BTC/USD?
Bear market winner: Argo Blockchain (ARNgb)
“I believe that Argo Blockchain is currently the bitcoin miner in the best financial condition,” Mellerud concludes.
“Argo has a strong balance sheet with little debt and strong operating cash flows relative to upcoming machine payments. Argo also has the second-lowest direct bitcoin production cost.”
Bear market loser: Marathon (MARA)
Marathon listed on Nasdaq in 2013. “The weakest miner based on this analysis is Marathon. Marathon has a strong balance sheet with loads of cash, but its massive upcoming machine payments will quickly drain its balance sheet,” Mellerud writes.
“Therefore, I believe the company will be forced to liquidate most of the bitcoin on their balance sheet or sell their machine orders to other miners.”
The rest of the pack
Which BTC miners have the lowest production costs and who has the strongest cash flow? Look at the winners and losers in individual categories:
Cash flow winners: Argo (ARNgb) and Core Scientific (CORZ)
Cash flow losers: Marathon (MARA) and Riot (RIOT)
Balance sheet strength winners: Marathon Digital Holdings (MARA) and Riot Blockchain (RIOT)
Balance sheet strength losers: Stronghold (SDIG) Core Scientific (CORZ)
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