Stocks of major Bitcoin mining firms tank as market downturn worsens

Stocks of major Bitcoin mining firms tank as market downturn worsens
TL;DR Breakdown
  • Bitcoin mining stocks have continued to plunge so far in 2022 following the massive decrease in the price of the underlying asset.
  • The most valuable public miner in the United States shed over 60% YTD.

Following the mayhem in the cryptocurrency market recently, the shares of the five largest publicly-traded Bitcoin mining companies have dropped by more than 50 percent year-to-date, according to a market report shared by Arcane Research analyst Jaran Mellerud. 

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Stocks of Bitcoin mining firms halved

The stock price of the Bitcoin mining companies – Core Scientific, Hut 8, Bitfarms, Riot Blockchain, and Marathon Digital – has more than halved since the beginning of 2022, Mellerud said. 

The stock price of Riot, one of the largest US-based Bitcoin mining companies, was impacted the most. According to the report, Riot’s stock price was down over 65% YTD, as of May 11, marking the biggest loss among the top five public miners. At the moment, the stock price is at $6.84, accounting for a nearly 70% YTD loss.

Riot is followed by Hut 8, which lost about 63%. The shares of Marathon, Core Scientific, and Bitfarms record 62%, 58%, and 56% losses in the same timeframe, respectively. 

While explaining the reasons behind the Bitcoin mining stock decline, Mellerud pointed out the majority of these companies hold a significant amount of Bitcoin; thus, were severely affected by the massive decline of BTC. “But most importantly, the decrease in the bitcoin price leads to considerably lower revenues for these companies.”

Mellerud also pointed out that these companies have been mining less Bitcoin lately, amid the continuous increase in global Bitcoin mining hashrate – meaning the industry is becoming more competitive. 

On the whole, most of these businesses have not expanded their hashing rate as quickly as investors anticipated. Investors may have modified their growth expectations for these firms to more conservative ranges in order to stay ahead of the curve.

Jaran Mellerud, Arcane Research analyst.

Bitcoin, crypto market plummets with equity market

Overall, the crypto market is down 17% in the past 24 hours. While BTC suffered about a 12% decrease, ETH recorded a more than 22% drop from Wednesday. The traditional market is also facing severe losses, and it’s reported that the correction between crypto and equity has strengthened in recent months. 

Cryptocurrency and equities markets are largely declining in tandem due to a widespread risk-off environment, in which many investors are fleeing to cash. […] The correlation between the two asset classes has strengthened in recent months owing to an increase in the number of publicly listed firms engaged in blockchain and digital assets, which is not expected to reverse course.

Steven McClurg, CIO of Valkyrie Investments.

Bitcoin plummeted below the critical level of $33,000 this past weekend as a decline in riskier asset classes such as technology stocks was followed by the Federal Reserve’s decision to raise interest rates in order to rein in decades-high inflation. The Nasdaq 100, which is heavily reliant on technology, has dropped 25% from its peak in November, while the S&P 500 has shed about 14 percent during the same period.

Next halving is less than 105,000 blocks away

On Thursday, Poolin mined another 0.16215354 BTC ($6,402.45) in fees as Bitcoin entered the second half of the third halving cycle. This one – like any other before it or after it – has 210,000 blocks available to be mined and 105,000 of them have already been mined since May 11th.

The next halving, which is now scheduled to occur in Q2 2024, will result in a supply reduction of 50%, which is expected to create another “supply shock.” Currently, around 90% of the 21 million BTC has been mined, with less than 7% of the overall supply left after the network’s fourth halving cycle in two years.

Another detail to consider is that the Bitcoin mining hash rate peaked at 249.1 exahashes per second (EH/s) on Wednesday, slightly before the second leg of the cycle began. The metric trended downward as the crypto selloff got worse. Increased hash rates suggest more computational power is required from miners, which means the network has become more secure.

John Lincoln

John Lincoln

John keeps readers hooked with a natural flow even when they're going through technical news pieces. He gets reader engagement by developing original content with a keen eye for details. In between crypto news hunting, John keeps fit with his favorite sports like swimming and basketball.

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