The volatility in crypto markets hasn't just seeped into the crypto mining sector -- this sector has become incredibly volatile relative to underlying cryptocurrencies themselves.
In this episode of "The Crypto Show" on Backstage Pass, Fool.com contributor Chris MacDonald and The Motley Fool's Eric Bleeker discuss the outlook for crypto miners in general and talk about two top picks from this sector.
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Eric Bleeker: I guess one follow-up on this, because if someone's watching this, they might wonder, is there opportunity in [the crypto mining] space? Is this something I should be looking at?
Number 1, I would say, is this a space that interests you as an investor? If so, maybe if that's offered.
Second, what are the competitive advantages? What should people be looking at as a way to assess quality, maybe one of these businesses versus the other. It sounds like there's a lot of political risk here. In developed worlds, you maybe have the environmental factors but the other companies that might be trying to go through Kazakhstan, we have a history of governments cracking down on this in even worst way.
It sounds like where your production is located, obviously, the input costs around electricity. Is there anything else investors should look for when they're differentiating between these companies?
Chris MacDonald: Yeah, there are some metrics. I was looking into Riot (RIOT -6.84%) and Mara, specifically, Marathon Digital (MARA -8.96%), those are two of the companies I think are probably higher-quality in this space.
The main metrics that a lot of investors look at are the hash rate for these miners. Basically, how much computing power they're putting out relative to their competitors. That will inform market share and therefore, their pricing power in the market, essentially.
There are some levers that can be pulled by these companies to gain market share and essentially, grow in an environment where everyone is pretty much a price taker. There are some quality metrics that can be looked at. In my view, probably Riot and Marathon are the two that stand out in that regard.
There were a number of more meme, like SOS and Caanan and some of the Chinese-based crypto miners, they've been really hit hard based on the Chinese regulations of late. I know SOS was a big meme-stock recently. There's some meme aspect to this as well that's providing probably a little bit of a headwind right now as we touch back again on the de-risking element in the market.
Riot and Mara would probably be the two more stable ones that I would look at right now.