Institutional Investors Growing Curious on Crypto Mining but With ‘Plenty of Skepticism,’ Analyst Says

About 15% of Wall Street brokers covering the payments sector are taking bitcoin seriously now, according to a D.A. Davidson analyst.

AccessTimeIconOct 25, 2021 at 3:06 p.m. UTC
Updated May 11, 2023 at 7:06 p.m. UTC

Interest from institutional investors in bitcoin and crypto mining stocks is growing, although most of these investors are still relatively new to the sector and have reservations about the valuation of mining stocks, Wall Street firm D.A. Davidson’s analyst wrote on Monday.

  • Analyst Christopher Brendler, who recently initiated research coverage of the crypto miners with a positive outlook, said he estimates that about 15% of the Wall Street brokers that cover the payments sector are taking bitcoin seriously now, up from about 5% at the start of this year.
  • “While most investors are still new to this area, there were also quite a few already involved and able to dig deep into our new coverage,” Brendler wrote.
  • He noted that almost all the investors who are already involved in the sector agreed with his near-term bull case for the crypto miners, but also had plenty of skepticism, mostly around valuation.
  • With bitcoin’s price hitting all-time-highs last week and crypto mining stocks outperforming bitcoin itself, investors have become skeptical on the valuation of the miners and where their stocks might be heading. Marathon Digital and Riot Blockchain have risen about 1,500% and 600%, respectively, over the last twelve months, while the price of bitcoin rose 377% in the same time period.
  • “We admit traditional valuation metrics may not apply in this sector as future cash flows are exceedingly difficult to predict,” Brendler added.
  • However, it’s worth noting that crypto miners are highly leveraged to bitcoin prices as they derive most of their revenue from mining digital currencies and tend to hold as many of the minted digital coins as possible on their balance sheets.
  • Brendler’s top pick within the miners is Hut 8 Mining (HUT), whose enterprise value he estimates is trading at 4.4 times its 2022 EBITDA, a measure of the miners’ profitability. Meanwhile, most of its peers are currently trading at between 6.6 times to 9.1 times 2022 EBITDA.


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Aoyon Ashraf is managing editor with more than a decade of experience in covering equity markets

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