This article explores a range of data relevant to the performance of public mining companies, different strategies from these companies in current market conditions, and why the public mining market is important to the broader bitcoin economy.
Bitcoin public 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 shows the brutality with the year-to-date bitcoin withdrawal along with withdrawals for 15 major public mining companies over the same time period.
There is no productive reason to overemphasize drawdowns. The numbers speak for themselves.
The five worst results traded on the Nasdaq to date are:
- TeraWulf (-90.9%)
- BIT Mining (-89.1%)
- Mawson (-86.6%)
- Greenidge (82.7%)
- Stronghold (-81%)
Of course, this kind of performance is not unexpected considering 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 price data from bitcoin’s all-time high at the end of 2021 at the time of writing (the end of July 2022). Bitcoin and all mining companies naturally went down together, but no mining company outperformed (or had a lower drawdown than) bitcoin.
It is worth noting that even in this nine-month period, the close correlation between all mining stocks is evident after May 2022, compared to still close but significantly weaker correlations in previous months.
Even worse than comparing mining stocks to bitcoin’s drawdown is comparing them to the Standard and Poor’s 500 stock market index. The line chart below shows this data and it is evident that the S&P 500 has beaten mining stocks so far in 2022.
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 fall even harder. It wouldn’t be surprising, however, to see one or two miners faring slightly better than bitcoin. But the market was brutal across the board and none of them outperformed.
Summer update on Bitcoin mining
Putting aside the fate and obscurity of the article up to this point, the miners are still doing well despite market conditions. In many cases, monthly bitcoin production is on the rise, new funding is secured and expansion plans continue.
Specifically on the monthly production of bitcoin, for example, in recent months we have seen:
- Iris Energy increases production by 10% in May
- Hive my over 278 BTC in June
- Greenidge increases production by 18% in June
Some public miners are continuing to sell larger than usual amounts of their normal bitcoin production to resist the bear market. Core Scientific and Argo are examples of this. Other miners continue to hold many or nearly all of the coins they mine, including Hut 8, which is expanding its holdings, and Marathon, which did not sell bitcoin in the second quarter of 2022.
And despite the bear market, many public miners continue to plan for expansion projects.
Compared to six months ago, the 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 shot down. Core Scientific secured $ 100 million in new funding and signed a 75 megawatt (MW) hosting agreement. CleanSpark continues to acquire discounted mining hardware. Compute North and Compass Mining have signed a 75 MW expansion agreement. And Marathon has secured a 200 MW hosting deal.
Bitcoin’s price may still be well off its highs, but growth in the mining sector is still buzzing.
Who cares about public miners?
In many Bitcoin circles, small-scale and domestic miners are loved ones, 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?
Share price performance for mining companies is a reasonably good indicator for broader investor interest in bitcoin, aside from the price of bitcoin itself. As more traditional financial analysts are paying attention to the mining market, it is increasingly useful to gauge the general sentiment around bitcoin.
Mining companies are also a high beta investment vehicle (or leveraged game) for bitcoin investors. So, if a particular investor is bullish on bitcoin and wants to outperform bitcoin itself, they might consider investing in a basket of mining stocks.
The status of the largest miners in the industry can also be a sign of the health of the bitcoin economy. Miners are always the bulls of last resort for bitcoin. And while problems for public miners don’t always mean problems for bitcoin, the opposite is often true. The good times for public mining companies often signal good times for bitcoin.
Public Bitcoin miners are entering HODL
The current bear market for bitcoin has been brutal for public mining companies, as the charts in this article show. Despite this, most public mining companies continue to hold bitcoins, secure new hosting and financing deals, and prepare for the next bull market and the fast approaching halving event. Whether the market gets worse before it gets better is an open question. But the mining sector is far from dead or gone. Bitcoin mining is holding up to the bear market as anyone might expect.
This is a guest post from Zack Voell. The views expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.