The Bitcoin (BTC) price rebound to multi-month highs also had a positive impact on mining stocks. Many crypto-mining stocks recorded their best monthly performance in a year. The surge in mining stocks also eased the problem of miners having to sell their mined coins to increase liquidity in 2022.
Bitfarms – one of the top BTC mining companies – registered a 140% surge in the first two weeks of January 2023, followed by Marathon Digital Holdings with a 120% surge. Hive Blockchain Technologies has seen its share price nearly double over the same period, while the MVIS Global Digital Asset Mining Index is up 64% in the first month of the new year.
Luxor’s Hashprice Index, which aims to calculate the number of miners that can be made from the processing power used by the Bitcoin network, has increased by 21% this year. This partly reflects greater rewards due to the rise in Bitcoin prices.
The bull run in 2021 has caused some mining companies to go public, while others are investing heavily in equipment and expansion. However, the long crypto season of 2022 reveals the vulnerability and lack of proper structure in many of these mining companies.
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The 2021 bull market saw a significant increase in debt by the Bitcoin mining industry, which had a negative impact on the financial position during the subsequent bear market. Common Bitcoin miners owe more than $4 billion, while the top 10 Bitcoin mining debtors owe nearly $2.6 billion. At the end of 2022, prominent BTC miners such as Core Scientific filed for bankruptcy.
January’s surge in BTC prices has helped struggling crypto mining stocks reach new year-to-date highs, but it’s also helped Bitcoin-based exchange-traded funds outperform most of the traditional equity ETF market.