What happened
Shares of cryptocurrency mining company Hut 8 Mining (HUT) were up on Thursday even though the company didn't have any news to report. Since this is new to the U.S. stock market, investors are likely still getting to know the company and digesting its news from yesterday. As of 2:30 p.m. EDT, Hut 8 stock was up 11%.
So what
Hut 8 completed its listing in the U.S. a couple of weeks ago even though it was already publicly listed in Canada. The company mines both Bitcoin and Ether, the tokens that run the Ethereum blockchain, and it's using the proceeds from its U.S. listing to increase its mining capabilities.
Image source: Getty Images.
As of March 24, Hut 8 held 3,233 bitcoins that it had mined itself. As of this writing, the price of Bitcoin is around $33,500, valuing these crypto assets at over $100 million. On top of these holdings, the company announced yesterday that it had spent $44 million to more than double its mining abilities. By the end of 2021, it expects its new equipment to be fully operational, bringing its total mining yield to 14 to 16 bitcoins per day.
Now what
As I said at the onset, investors are likely still digesting all of this for Hut 8, explaining today's pop. When compared to other cryptocurrency mining companies, Hut 8 looks cheap. For comparison, Marathon Digital Holdings was holding 5,518 bitcoins as of June 1 and mined around seven bitcoins daily in May. However, Marathon Digital's market capitalization is over $3 billion, whereas Hut 8's market cap is under $1 billion. Therefore, on this direct comparison, Hut 8 looks undervalued, and that's likely why investors are buying today.
However, a word of caution: Investing logic cuts both ways. One could argue Marathon Digital is overvalued compared to Hut 8 depending on the perspective you start with. Therefore, to me, it's always better to avoid investing using comparison logic and instead focus on the factors that can help a business deliver market-beating performance. In the case of Hut 8, it will need the prices of Bitcoin and Ethereum to continue to rise long term. If you don't believe that first and foremost, it's best not to invest in Hut 8 even if it looks cheap when compared to peers.
