After a historically-bad year for bitcoin mining, public companies that fell to penny stock status rebounded in January after a strong bitcoin rally.
2022 may be the worst year on record for bitcoin mining. Every market is suffering the consequences of unprecedented recklessness by central banks around the world. But because bitcoin is nothing if not volatile — and because mining acts as a leveraged bet on bitcoin itself — the mining sector of the bitcoin economy ended last year battered and bruised. In fact, many public mining companies are relegated to trading as literal penny stocks.
Thanks to an unexpected, wildly-bullish start to the new year, however, investors have seen bitcoin mining stocks roar again. No doubt the relief in the share price (and the price of bitcoin itself) is welcome. How long this rally will last, though, is an open question.
This article summarizes the state of bitcoin mining at the beginning of this new year, the tragedies left behind in the previous year and the opportunities that lie ahead.
New Year Mining Rally
2023 started with a bang for publicly traded bitcoin mining companies.
Year to date, companies like Riot Platforms, Marathon Digital and CleanSpark have all gained between 40% and 110%, according to market data from TradingView. This surge in stock prices is largely due to the ongoing rally in the price of bitcoin. Since New Year’s Day, the major cryptocurrency has gained more than 44%. As a result, the mining economy has also improved. The hash price has jumped 25% even though the hash rate (which, when it rises, usually causes the hash price to fall) set a new high in January.
In that space, bitcoin miners ended 2022 on a very bearish note. As mentioned above, many trade as literal penny stocks during the holidays.
A Rundown On Penny Stocks
Penny stocks intuitively suggest securities that trade at market prices of just pennies. And, in fact, many bitcoin mining companies have seen their share prices drop to pennies. But officially, the definition of a penny stock refers to a small company’s stock that trades for less than $5 per share. Penny stocks can trade on major exchanges like Nasdaq, which already lists many bitcoin mining companies. But many trade through over-the-counter (OTC) transactions.
Some bitcoin mining companies have been lucky to see their share prices above $5 at the end of last year, though. The data in the following section shows that, after soaring to a multi-billion-dollar market capitalization, not a few but many mining companies have shares trading below one dollar.
Bitcoin Mining Penny stock data
Bitcoin is down an estimated 65% in 2022. Although not the worst bear market drawdown on record for bitcoin itself, miners are not as lucky. The bar chart below shows the actual share prices for a select group of leading mining companies through 2022. Even a quick glance at the visual will reveal a common theme: down… a lot.
The worst comes to an end for this poor company. By the end of 2022, nearly a dozen companies have seen their stock prices fall below one dollar. The list below includes bitcoin mining companies that traded below $1 at the end of last year.
- Scientific Core: $0.20
- Hut 8: $0.87
- TeraWulf: $0.58
- Mawson: $0.28
- Hosted: $0.47
- BIT Mining: $0.20
- Argo: $0.44
- Cipher: $0.62
- Digital Bits: $0.56
- Greenidge: $0.37
- Stronghold: $0.46
After reviewing all the data above, you may be asking: Does the price of bitcoin mining stocks even matter? Obviously not for the long term success of Bitcoin. But the general mining sector represents Bitcoin itself to an insignificant level. The mess of taking the risk of an unwinding bull market, greed and general excess is not fun. Hopefully, the worst is over.
The Road To Pink Slips
How did the once public bitcoin mining sector evolve into penny stock status?
After rising to a total market value of more than $100 billion, bitcoin mining companies fell sharply. This effect was somewhat inevitable when bitcoin itself crashed. The mining business is expensive, capital intensive and highly competitive. When market conditions are anything but perfect, heads start metaphorically rolling.
Additionally, it’s worth noting that the macroeconomic headwinds that every market is facing are effectively killing all tech markets around the world. Bitcoin mining has no chance to escape the bloodshed. Meta, for example, was the worst performer in the Standard and Poor’s 500 index last year. Apple, which dominates the weighted S&P 500 index by about 6%, also fell sharply at the end of last year.
However, beyond the macroeconomic landscape, bitcoin miners are not immune to greed and reckless business decisions. A large part of the growth of public mining hash rates and the valuation of mining companies is directly tied to overleveraged investors and operators who made risky bets in the same style as other “crypto” companies, which are now bankrupt. Miners become penny stocks or file for bankruptcy as a result of the same choice.
New Year, Old Miner
Many new mining teams that entered the market in the past few years did not make it to 2023. But every miner that survived last year is now a hardened veteran. Is the bear market over? I don’t know. But in the face of bankruptcies, lawsuits, executive departures, delistings and more, the miners that are still hashing today may continue to scramble for something.
Hopefully, the lessons of greed and degeneration of the last bull market are not soon forgotten, but this writer is not holding his breath.
This is a guest post by Zack Voell. The opinions expressed are entirely my own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.