Global Investors currently have two choices to acquire Bitcoin exposure: directly from an exchange or through a Bitcoin Exchange Traded Fund (ETF). As of 2022, Bitcoin ETFs are readily available in Canada, Europe, Brazil and Dubai, among other places.

The story is different in the United States, home of the largest capital markets. Although a number of ETF applications have been submitted for approval to the US Securities and Exchange Commission (SEC), all have been denied. It is hoped that once clear regulation for US investors is provided, the SEC may look more favorably on submitted applications.

Whilst this regulation takes shape, other alternative proxy investments to Bitcoin are available. Namely, Bitcoin mining stocks.

Mining stocks have seen enormous interest over the past 18 months. Two in particular, Marathon Digital (MARA) and Riot Blockchain (RIOT), have benefited significantly from their early listings on the NASDAQ. Significant retail and institutional investment enabled Marathon and Riot to expand with speed in comparison to other peers, such as more recently NASDAQ listed miners Argo Blockchain (ARBK), Bitfarms (BITF), Hive Blockchain (HIVE) and HUT8 (HUT).

Another firm, Canaan, has also taken advantage of its position within the market as a manufacturer to enjoy a solid financial position. Let’s explore each in turn below.

Disclaimer: This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any investment or to adopt any investment strategy.

Marathon Digital

Among other strategies, Marathon benefits from hosting arrangements with providers like Compute North. By outsourcing its hosting and paying a premium on its energy costs, Marathon has clearly shown its preference to utilize all available capital to grow its hash rate, mine Bitcoin and hodl. Marathon has a significant number of miners in storage awaiting to be installed at Compute North’s new facilities in West Texas, and have announced in their most recent April monthly mining update, that they will be increasing their current hash rate of 3.9 EH/s to 13.3 EH/s by mid 2022, and to an even more impressive rate of 23.3 EH/s by early 2023. The majority of installations should occur in Q3 2022, before a quieter Q4 period, in readiness for further deliveries by Bitmain.

Riot Blockchain

Riot has gone after large, vertically-integrated infrastructure most notably with their flagship site at Whinstone, Rockdale purchased for $80 million in cash and 11.8 million shares. Additional investment will be required to achieve the full capacity of the Whinstone site at 750MW and to fund the planned 12.8 EH/s hashrate. Riot has also adopted immersion technology at scale, which could potentially allow them to achieve greater hashrate from their miners, reduce their costs of electricity and increase the life of the mining rigs.


Canaan is a leading provider of supercomputing machines and is credited with having invented the first ASIC. They are well known for their Avalon mining series. Total computing power sold in 2021 was 22.3 million TH/s, representing a year-over-year increase of 238.5%, from 6.6 million TH/s in 2020.

In Q4 2021, Canaan started to diversify into Bitcoin mining. Canaan entered into strategic collaboration agreements with multiple mining firms for joint-mining business in Kazakhstan. A deployment of 10,000 miners gives Canaan an opportunity to diversify into self-mining revenues.

Stock analysis

All three companies share prices are generally correlated with the price of Bitcoin. Bitcoin mining stocks are generally more volatile, however. In 2021, the price of BTC climbed by about 48% year-over-year, starting the year at $32,149 and closing at $47,700. In comparison, shares of Marathon, one of the largest North American crypto mining companies, rose by 215% in the same period, according to YCharts.

2021 financial performance

Let’s consider how these three companies have performed over the 2021 Financial Year in the summarized table below:

Revenues were considerably higher for Canaan, which benefited from not only the increased sales, but also from the increased price of ASICs.

All three companies achieved good margins, with Marathon at 78%, Canaan at 57% and Riot achieving 49%.  However, when you consider the net income (profit) for each, only Canaan achieves a positive outcome, with an impressive $313.9 million for the year representing 40% of revenues.

One of the main costs and reasons for the losses sustained by both Marathon and Riot is the level of share compensation, which refers to the rewards given by the company to its employees by way of giving them the equity ownership rights in the company. Long term, the motive remains to align the interest of the management shareholders and the employees of the company, paid in lieu of cash issued. The changes in the fair market value of an investment, if lower, are also considered an expense. This would also apply to any Bitcoin held in the corporate treasury.

Many companies highlight the reconciliation of GAAP and Non-GAAP items, which takes into consideration the non-cash items to determine a better idea of a company’s performance from its operations. The table below highlights this reconciliation

Fundamental analysis

Further analysis of the fundamentals of each of the companies can be determined by looking at some of the valuation metrics.  Marathon actually reached a market capital value (MCAP) in excess of $8 billion in November 2021, when the share price reached an all time high (ATH) of $83.45. Riot’s share price rose to $46.28 in November 2021m providing a MCAP of nearly $5 billion. As Bitcoin started to fall from its ATH of $69,000 in November 2021, so have all the closely correlated stocks.

If you consider the Price to Earnings (PE) ratio – a ratio for valuing a company that measures its current share price relative to its earnings per share (EPS) – Canaan has a PE ratio of 2. This value implies it would take two years of accumulated earnings to equal the cost of the investment (MCAP).  For Mara, it would take nearly 11 and for Riot a little over 16 years.  However, it should also be noted that these are growth stocks and are all looking to grow their businesses and hashrate significantly over the coming years. It would be more prudent to consider a forward PE ratio based on future projected earnings.

Overall, mining stocks remain highly correlated to Bitcoin’s price. The abundance of information found in public disclosures give additional insights into which teams are performing the best, giving a solid indication of which stock the market will prefer over time.

Disclaimer: This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any investment or to adopt any investment strategy. This information is for educational purposes only and is as of the date of that particular presentation. Compass does not guarantee profits from mining activity. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a mining product, service or strategy. Changes in the rates of exchange of cryptocurrencies, hashrate, difficulty, network transaction fees, hosting and other fees may cause the efficiency and returns of mining to diminish or increase. Individuals are responsible for their own decisions regarding cryptocurrency mining, including all financial and operational risks.

Correction (May 25, 2022): The fourth graphic had inaccurate information included. The graphic has since been updated.