Reading Financial Statements: A Crypto Investor's Guide to TradFi Analysis

Why Crypto Investors Need TradFi Skills

Bitcoin miners (MARA, RIOT), exchanges (Coinbase), and blockchain firms are publicly traded. Evaluating them requires understanding financial statements.

The Three Statements

Income Statement: Revenue, expenses, profit. Key: gross margin (above 50% is excellent for tech), EPS (most-watched metric).

Balance Sheet: Assets, liabilities, equity. Key: cash position, Bitcoin holdings, total debt. Debt-to-equity above 1.0 = risky.

Cash Flow: Actual money in/out. More reliable than income statement. Key: operating cash flow (positive & growing = healthy), free cash flow.

Key Ratios

• P/E: Price/Earnings. Lower = cheaper. Growth companies may have high P/E
• EV/Revenue: For unprofitable companies
• Price-to-Book: Compare market cap to BTC holdings (MicroStrategy)
• Debt/EBITDA: Above 3x is concerning

Evaluating a Bitcoin Miner

1. Cost per BTC mined (must be below market price)
2. Hash rate growth trajectory
3. BTC on balance sheet (HODLing or selling?)
4. Energy source (renewable = competitive advantage)
5. Share dilution over time

Red Flags

• Revenue growing but cash flow declining
• Frequent "one-time" charges every quarter
• Auditor changes or delayed filings
• Executive insider selling