Several public Bitcoin miners were on the brink of bankruptcy at the end of last year. But the latest rally in the market infused a sense of careful optimism into the Bitcoin mining sector, resulting in massive gains for most associated stocks.
Bitcoin Mining Stocks for the Win
As Bitcoin miners slowly escape the incessant bear trap, stocks related to the sector are now seeing a notable resurgence.
According to BTC mining expert Jaran Mellerud, bitcoin mining stocks have suddenly rallied alongside the price of the flagship crypto-asset in 2023, allowing “wound-licking mining stock investors to regain some of their massive losses.”
As BTC amassed 80% YTD gains, the HI Crypto Mining Stock Index raked 115% during the same period. In the process, the industry’s leading mining firms have not only outpaced Bitcoin itself but also the top tech stocks. Even the tech-heavy NASDAQ 100 Index only managed a 20% gain so far this year.
Best Performing Miners
At the top, Core Scientific positioned itself as the best-performing Bitcoin mining firm so far in 2023. It was one of the many companies that filed for bankruptcy last year. It had accused Celsius of failing to pay its power bills and subsequently cited the non-payment as a major factor in the liquidity issues. Even so, its stocks recorded an astonishing 455% in gains.
Mellerud, in his analysis, explained that its massive debt boosted its equity this year. The miner’s cash flows relative to equity have been “positively affected (but disproportionately so) by the improvements in mining economics.”
Meanwhile, Digihost, Cipher, Riot, Iris Energy, and Marathon also performed well. Most of these mining firms have relatively low debt levels relative to equity and are thus significantly less financially leveraged than Core Scientific, Mellerud observed.
The analyst further pointed out the resemblance of the current market cycle to that of Bitcoin’s mini bull cycle of 2019, where the crypto-asset surged by 260% from bottom to top. If this cycle repeats, bitcoin is expected to top out at $42k sometime this year. This also means that Bitcoin mining stocks are likely to soar, as well.
Investment banks across Europe and North America have revealed that notoriously volatile Bitcoin mining stocks have been outperforming tech-heavy index stocks since the beginning of this year. This trend has been especially noticeable in the past three months, as the traditional tech stocks have significantly lagged behind their Bitcoin mining counterparts, according to a newly released report by industry experts.
The report suggests that a surge in Bitcoin mining stocks has pushed up their performance against the tech industry. The explosive gains of crypto stocks have led analysts to believe that Bitcoin miners have been some of the top performers in the current market environment.
The report notes that the rise of Bitcoin miners is due largely to the influx of institutional investors, who are showing increasing interest in the market. This, along with the increasing acceptance of Bitcoin as a legitimate form of payment, has made it more attractive for large-scale investors.
At the same time, the traditional tech sector has been plagued by macroeconomic headwinds, increasing competition from tech disruptors and slowing innovation. This has resulted in investors looking for more dynamic, uncorrelated assets, such as cryptocurrencies, along with the associated stocks that benefit from their growth.
The report indicates that speculation surrounding the price of Bitcoin, as well as a new generation of crypto miners entering the market, are further driving the sector’s outperformance. If these trends continue, the report suggests that Bitcoin mining stocks have the potential to outperform the traditional tech sector throughout 2023.
Industry analysts noted that while Bitcoin miners have been volatile in the past, they are still attractive investment vehicles due to their potential to generate substantial profits. They also cautioned that potential investors should be aware of the substantial risks associated with the sector.
Overall, the report suggested that Bitcoin mining stocks have the potential to outperform tech-heavy index stocks in the current market environment and could continue to do so in 2023. Investors with an appetite for risk may want to take advantage of the potential upside these assets offer.