Public bitcoin mining companies have been an unusually prominent fixture of the crypto market for the past few years as investors, media and regulators oversee their financial growth and operational expansion. Although the share prices of all these companies outperformed bitcoin during the latest bullish market trend, the opposite effect is clearly at play now as public miners try to weather the ongoing bear cycle. In fact, none of these companies has managed to beat bitcoin so far in 2022.
This article explores a set of data relevant to the performance of public mining companies, the different strategies of these companies in current market conditions, and why the public mining market matters to the broader bitcoin economy.
public bitcoin mining company data overview
Bitcoin has had a tough year so far. But public mining companies have had an even tougher year. The bar chart below visualizes the brutality of bitcoin’s year-over-year declines, as well as the declines for 15 major public mining companies over the same time period.
There is no productive reason to overemphasize the drawdown. The numbers speak for themselves.
Here are the five worst-performing Nasdaqs trading so far this year:
- Terawolf (-90.9%)
- BIT Mining (-89.1%)
- Mawson (-86.6%)
- Greenidge (82.7%)
- Stronghold (-81%)
Of course, such performance is not unexpected given the current market environment. A more complete picture of the comparative performance of bitcoin and mining companies is shown in the line chart below, which includes bitcoin’s highest price data from late 2021 to the time of writing (end of July 2022). Bitcoin and all mining companies are naturally going down together, but not a single mining company has outperformed (or underperformed) bitcoin.
It’s worth noting that even in this nine-month period, the tighter correlation between all mining stocks is evident after May 2022, compared to the still-close-but-noticeable-weak correlations in previous months.
It’s worse to compare mining stocks to the decline of bitcoin than to compare them to the Standard & Poor’s 500 stock market index. The line chart below illustrates this data, and it is clear that the S&P 500 has outperformed mining stocks so far in 2022.
Is this kind of underperformance unusual? In bearish market trends, no. Mining companies tend to outperform bitcoin when bitcoin grows. And when bitcoin goes down, mining companies fall even harder. However, it would not be surprising if one or two miners fare slightly better than bitcoin. But the market has been brutal throughout, and none of them have outperformed.
Summer Update on the Bitcoin Mining Sector
Putting aside the doom and gloom of the article up to this point, the miners are still doing well regardless of the market conditions. In many cases, monthly bitcoin production is increasing, new financing is being secured and expansion plans are underway.
Specifically on monthly bitcoin production, for example, as seen over the past few months:
- Iris Energy increased production by 10% in May
- Hive Mine Over 278 BTC in June
- Greenidge increases production by 18% in June
Some public miners continue to sell larger-than-usual amounts of their regular bitcoin production in the face of a bear market. Core Scientific and Argo are examples. Other miners continue to hold many or almost all of the coins, including Hut 8, which is expanding its holdings, and Marathon, which sold no bitcoin in Q2 2022.
And despite the bear market, many public miners are planning expansion projects.
Compared to six months ago, margins for miners are still pretty tight. Hash value, bitcoin price, yada yaad. But certainly one of the most important sectors in the bitcoin economy is alive and growing, even if the broader market is somewhat battered and beaten. Core Scientific secured $100 million in new funding and signed a 75 megawatt (MW) hosting deal. CleanSpark continues to receive discounted mining hardware. Compute North and Compass Mining signed an expansion agreement for 75 MW. And Marathon won a 200 MW hosting deal.
The price of bitcoin may still be quite far from its highs, but developments in the mining sector are still going along.
Who cares about public miners?
In many bitcoin circles, small-scale and domestic miners are the darlings, not institutional mining entities. Even though mining units of all types and sizes have their place in bitcoin, some readers may wonder why does the public mining market matter at all?
In addition to the price of bitcoin, share price performance is a good indicator for mining companies to gauge broader investor interest in bitcoin. As more traditional financial analysts are paying attention to the mining market, it is increasingly useful to gauge general sentiment around bitcoin.
Mining companies are also a high-beta investment vehicle (or leverage play) for bitcoin investors. Therefore, if a particular investor is optimistic on bitcoin and wants to outperform bitcoin itself, they may consider investing in a basket of mining stocks.
The status of even the biggest miners in the industry could be a sign of the health of the bitcoin economy. Miners are always the bulls of last resort for bitcoin. And even though trouble for public miners doesn’t always mean trouble for bitcoin, the reverse is often true. Good times for public mining companies often indicate good times for bitcoin.
Public bitcoin miners are hiding
As shown in this article, the current bitcoin bear market has been brutal for public mining companies. Despite this, most public mining companies continue to hold bitcoin, secure new custody and financing deals, and prepare for the next bull market and bullish event. Whether the market will get worse before it gets better is an open question. But the mining sector is far from dead or beaten up. Bitcoin mining is weathering the bear market as well as one might expect.
This is a guest post by Jack Voel. The opinions expressed are solely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.