Public bitcoin mining companies have been an unusually large part of the crypto market over the past two years as investors, media and regulators watch their financial growth and operational expansion. Whereas the stock prices of almost all of these companies significantly outperformed bitcoin during the latest market uptrend, the opposite effect is clearly in play now as public miners attempt to ride out the ongoing bear cycle. In fact, none of these companies have managed to outperform bitcoin so far in 2022.
This article explores a body of relevant data on the performance of public mining companies, the different strategies of these companies under current market conditions, and why the public mining market matters to the broader bitcoin economy.
Introducing Public Company Bitcoin Mining Data
Bitcoin has had a tough year so far. But public mining companies had an even tougher year. The bar chart below visualizes the brutality with bitcoin mining since the start of the year alongside mining for 15 major public mining companies over the same period.
Bitcoin’s year-to-date withdrawal, alongside withdrawals from major public bitcoin mining companies, demonstrates the brutality of this bear market.
There’s no productive reason to over-emphasize levies. The numbers speak for themselves.
The five worst performers so far this year trading on the Nasdaq are:
- TeraWulf (-90.9%)
- Mining BIT (-89.1%)
- Mawson (-86.6%)
- Vertigo (82.7%)
- Stronghold (-81%)
Of course, this type of performance is not unexpected given the current market environment. A fuller picture of the comparative performance of bitcoin and mining companies is presented in the line chart below which includes price data from bitcoin’s all-time high in late 2021 through time of writing (end of July 2022). Bitcoin and all mining companies naturally trended lower together, but no mining company outperformed (or had a lower drawdown) than bitcoin.
It should be noted that even over this nine-month period, the tighter correlation between all mining stocks is apparent after May 2022, compared to the still close but significantly weaker correlations of the previous months.
The stock performance of public bitcoin mining companies is becoming increasingly correlated.
Even worse than comparing mining stocks to bitcoin’s decline is comparing them to the Standard and Poor’s 500 stock index. The line chart below shows this data, and it’s obvious that the S&P 500 has beaten mining stocks so far in 2022.
The performance of shares of the bitcoin mining company against the S&P 500 is even worse than against the price of bitcoin.
Is this kind of underperformance unusual? In bearish market trends, no. Mining companies perform much better than bitcoin when bitcoin goes up. And when bitcoin goes down, mining companies go down even more. It wouldn’t be surprising, however, to see one or two miners fare slightly better than bitcoin. But the market was brutal across the board, and none of them outperformed.
Bitcoin Mining Summer Update
Aside from the pessimism of the article so far, miners are still performing well despite market conditions. In many cases, monthly bitcoin production increases, new funding is secured, and expansion plans continue.
Specifically on monthly bitcoin production, for example, recent months have seen:
- Iris Energy boosts its production of ten% in May
- Hive mine on it 278 BTC in June
- Greenidge increases its production of 18% in June
Some public miners continue to sell larger than usual amounts of their regular bitcoin production to weather the bear market. Basic scientist and Argo are examples. Other miners continue to hold much or nearly all of the coins they mine, including Hut 8which extends its holdings, and Marathonwhich did not sell any bitcoins in the second quarter of 2022.
And despite the bear market, many public miners continue to plan expansion projects.
Compared to six months ago, margins are still significantly tighter for miners. Hash price, bitcoin price, yada yada. But what is arguably one of the most important sectors of the bitcoin economy is alive and growing even as the broader market is somewhat battered and beaten. Secure Core Scientific $100 million new financing and signed a 75 megawatts (MW) accommodation agreement. CleanSpark continues to acquire mining equipment at reduced prices. Compute North and Compass Mining signed a 75MW extension agreement. And Marathon got a 200MW accommodation agreement.
The price of bitcoin may still be far from its highs, but the growth of the mining sector continues to hum.
Who cares about public minors?
In many Bitcoin circles, small-scale and home-based miners are the darlings, not institutional mining entities. Even though all types and sizes of mining units have their place in Bitcoin, some readers may wonder why is the public mining market so important?
The stock price performance of mining companies is a reasonably good indicator of broader investor interest in bitcoin, aside from the price of bitcoin itself. As more traditional financial analysts are to pay attention in the mining market, it is increasingly useful to gauge the general sentiment around bitcoin.
Mining companies are also a high beta (or leveraged game) investment vehicle for bitcoin investors. So, if a retail investor is bullish on bitcoin and wants to outperform bitcoin itself, they might consider investing in a basket of mining stocks.
The state of the industry’s biggest miners can also be a signal of the health of the bitcoin economy. Miners are still the bulls of last resort for bitcoin. And while trouble for public miners doesn’t always mean trouble for bitcoin, the reverse is often true. Good times for public mining companies often mean good times for bitcoin.
Public Bitcoin Miners Cling
The current bitcoin bear market has been brutal for public mining companies, as the charts in this article show. Despite this, most public mining companies continue to hold bitcoins, enter into new hosting and funding deals, and prepare for the upcoming bull market and halving event that is rapidly approaching. Whether the market will deteriorate before it improves is an open question. But the mining sector is far from dead or defeated. Bitcoin mining is weathering the bear market as well as anyone would expect.
This is a guest post by Zack Voell. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.