Crypto Mining Stocks Rally With Recovery in the Bitcoin and Broader Crypto Space
Bitcoin and the broader cryptocurrency market has shown strong resurgence earlier this week taking the broader crypto market to $1 trillion. With some optimism returning back into the crypto space stock of the crypto mining companies are also rallying recently.
Several crypto mining stock registered their best performance in over a year. Besides, the surge in the mining stocks has also relieved the troubled miners who have been selling a significant part of their mined coins in order to boost liquidity last year.
One of the top Bitcoin mining Bitfarms registered a 140% surge in the stock price during the first two weeks of January 2023. Similarly, the stock price of Marathon Digital Holdings witnessed a 120% price rally. During the same period, the Hive Blockchain technologies has seen its stock price double in value.
Since the beginning of 2023, the 20-member MVIS Global Digital Assets Mining Index is up 64% outperforming Bitcoin’s 28% gains. Since its inception at the end of 2021, this has been the index’s best month after a 88% drop during the last year of 2022.
At the same time, the Luxor Hashprice Index which measures how much a miner can make from the processing power used by the Bitcoin network, has jumped by 21% so far in 2023.
The 2021 bull run in the crypto space triggered several crypto mining firms to go public while simultaneously investing heavily in expansion and equipment. Besides, there was also a significant increase in the borrowing by the crypto mining firms.
On the other hand, a prolonged crypto winter last year in 2022 exposed cracks in the financial structuring of these crypto mining firms. Thus, despite the recent bounce back, public crypto miners are not entirely out of the woods.
As of date, the public Bitcoin miners owe more than $4 billion in liabilities while the top ten Bitcoin mining debtors collectively owe $2.6 billion. Last month in December 2022, Core Scientific, the largest Bitcoin miner by computing power declared bankruptcy.
Matthew Sigel, head of digital-asset research at fund manager VanEck told Bloomberg: “It appears more attractive to start a new Bitcoin mining venture than to try to pick the bottom in many of these listed stocks right now”.
Amid the cooling inflation and hope of declining interest rate hikes, risk-ON instruments like crypto have been rallying recently. However, it remains to been seen how far this rally is sustainable considering the stick inflation.