Bitcoin mining stocks surge

The stock market lists the shares of multiple bitcoin mining firms located in the United States. It goes without saying that these shares’ prices change in tandem with the value of Bitcoin, thus 2023 will be a very prosperous year for them.

The increase of bitcoin mining stocks in 2023

Let’s start with the MARA shares of Marathon Digital Holdings, which are listed on the Nasdaq.

They were about $3.4 at the beginning of the year, but by mid-January, they had increased to about $8.

This increase persisted into April, reaching about $12, and then increased to over $19 in June and July. But since then, it has reverted to roughly $9.2.

Riot Platforms is a comparable business, and its stock, RIOT, is likewise traded on the Nasdaq.

Similar in shape, the parabola rises from $3.4 at the beginning of the year to $7.5, $13.5, and finally above $20 in July before tumbling to the current $11.

Note that following the July peak, there was a steep decline in both cases, with October seeing a drop to less than $9. But now that Bitcoin has surged to above $35,000, they have increased once more, with gains of +21.4% and +26.7% in the last few weeks, respectively.

It is noteworthy, though, that in both instances, the year’s peak was attained when BTC was less than $32,000, whereas MARA and RIOT are currently trading at about half that amount.

The non-exclusions

Still, not every stock associated with bitcoin mining tracked the same kind of parabola.

For instance, Argo Blockchain’s ARBK began the year at about $1. It started a downward lateralization in January after already rising to $2.7, which is how it got to its present $1.1. Put another way, it hasn’t really gained anything this year.

Canaan’s CAN shares have followed a similar parabola, whilst the HIVE shares of Hive Blockchain Technologies have taken a rather intermediate route. In other words, HIVE’s price has fallen from its January peak, although following a similar trajectory to that of MARA and RIOT. The HUT of Hut 8 Mining has likewise taken a comparable course.

On the other hand, the parabolas of Bitfarms’ BITF and Bit Digital’s BTBT have mirrored that of the market leaders MANA and RIOT.

This demonstrates that a variety of factors, including the fact that they are successful businesses in and of themselves and might be dealing with issues unrelated to bitcoin, are influencing the price swings of these stocks in addition to the price of bitcoin.

A rise in competition

The competition has greatly increased throughout the course of the year, which may be the most problem.

It’s crucial to keep in mind that mining is a competition, even though the rise in hashrate is more likely the result of increased hashrate than the introduction of new, significant participants.

As a result, it feels as though the competition has intensified for certain players if they boost their processing power while others do not.

Furthermore, in contrast to 2021, when the Chinese mining ban virtually drove all Chinese miners to vanish, Chinese miners are back now, if in a lesser proportion than before.

It is evident that the most unwell miners may even be in danger of being extinct when you consider that the premium for miners will be reduced in April of next year in conjunction with the fourth halving of bitcoin.

There are more aspects to take into account when attempting to analyse the market performance of listed securities associated to mining, as all of this goes much beyond the price of bitcoin.

Gains in Bitcoin mining stocks: the energy problem

It is important to remember that the core of bitcoin mining is a genuine energy issue.

Energy usage is high, in fact, and this means substantial expenses.

If the cost of the raw material—electricity—increases dramatically, but to varying degrees for different industry participants, miners who find the increase to be excessive will be compelled to turn off their equipment and cease mining.

It is no accident that several mining companies filed for bankruptcy during the course of last year, coinciding with a decline in the market value of Bitcoin and an increase in the cost of electricity. And the worth of those who hung on fell on the stock market.

Coincidentally, MARA shares reached an all-time high of around $76 in November 2021, the same month as bitcoin. After that, they fell to $5.5 in less than six months, only to return to $3.4 by the end of 2022. Put another way, they ultimately lost 95% of their peaks during the course of 2022.

It is important to keep in mind, though, that they were only worth $2 at the end of 2020—prior to the most recent major bull run—so even after the bubble burst, they never went back to their pre-bubble levels.