Late last year, several public bitcoin miners were on the verge of bankruptcy. But the recent market rally has injected cautious optimism into the bitcoin mining sector, leading to sharp gains in most related stocks.
As bitcoin miners slowly emerge from the trap of an endless bear market, stocks associated with the industry are now seeing a notable recovery. According to BTC mining expert Jaran Mellerud, the sudden rise in bitcoin mining stocks in 2023 along with the price of the flagship crypto asset has allowed “mining stock investors to lick their wounds and recover some of their huge losses.”
With BTC up 80% year-to-date, the HI Crypto mining stock index is up 115% over the same period. In the process, the industry's leading mining company outperformed not only Bitcoin itself, but top tech stocks as well. Even the tech-heavy Nasdaq 100 is up just 20% so far this year. At the top, Core Scientific positions itself as the best-performing bitcoin mining company so far in 2023. It was one of many companies to file for bankruptcy last year. It blamed Celsius for failing to pay its electricity bills, later citing non-payment as a major factor in the liquidity problem. Even so, its stock posted a stunning 455% gain.
In his analysis, Mellerud explained that its large debt has boosted its equity this year. Mining companies' cash flows relative to equity "have been positively (but disproportionately) impacted by improving mining economics".
Meanwhile, Digihost, Cipher, Riot, Iris Energy and Marathon also performed well. Mellerud observed that most of these mining companies have relatively low levels of debt relative to equity, and thus significantly less financial leverage than Core Scientific. The analyst further noted that the current market cycle is similar to Bitcoin’s 2019 mini-bull cycle, when the crypto asset surged 260% from bottom to top. If this cycle repeats, Bitcoin is expected to peak at $42,000 sometime this year. This also means that bitcoin mining stocks could also soar.
