09 May 2022
Bitcoin mining stocks continue bleeding
Mining investors probably wish they had simply bought bitcoin instead at the beginning of 2022, as most bitcoin mining stocks have underperformed bitcoin by a wide margin.
All the five largest mining stocks by market cap have more than halved since the start of the year. The biggest loser is Riot, which is down 65% YTD. Marathon follows behind with a 63% loss.If we include the ten biggest public bitcoin mining companies, the best performer is CleanSpark, down 41%, telling us how horrible 2022 has started for the whole sector.Why are mining stocks bleeding? First, most of these companies hold thousands of bitcoin, and the bitcoin price is down 34% in 2022. But most importantly, the decrease in the bitcoin price leads to considerably lower revenues for these companies.Usually, when the bitcoin price falls, the global hashrate also decreases, but this has not been the case this year, as the hashrate has grown by 32% (slide 17). The combination of increasing global hashrate and a falling bitcoin price has led to less bitcoin mined for these companies and a lower USD denominated value of their mined bitcoin.As explained here, most of these companies have not grown their hashrate as fast as investors were hoping. Investors may have adjusted their growth assumptions for these companies to more conservative territories.