After a year-long winter accompanied by massive losses in the mining sector, is the youngest Bitcoin-Recovery a relief for miners. Additionally, the Bitcoin price rally has rubbed off on crypto mining stocks as they have seen the best performance over the past year.
In the 2022 bear market, public crypto miners faced up to $4 billion in liabilities due to low profitability and low stock prices. As a result, many miners struggling to stay afloat resorted to selling their coin reserves to increase liquidity.
Bitfarm And Others Record Yearly Highs In Mining Stocks
The first two weeks of 2023 have brought relief to miners with the rally in BTC price. Among the top gainers is Bitfarms, which saw a 140% surge in the first 14 days of January.
Marathon Digital Holdings Inc. followed Bitfarms with a 120 percent surge in mining stocks. Also Hive Blockchain Technologies Limited saw its shares rise to nearly double their original value in the first two weeks of the year.
MVIS Global Digital Assets Mining Der index surged 64% in January, while the Luxor Hashprice Index saw a 21% gain. The Luxor Hashprice Index quantifies the possible profit of the miners based on the computing power consumption in the Bitcoin network. The significant increase in these indices partly reflects an increase in mining rewards due to the Bitcoin price rally.
The 2021 crypto bull run prompted many private mining companies to publicly announce their stock holdings. Many bitcoin mining companies borrowed huge sums to expand during the 2021 bull market, hoping to break even with profits. Some invested heavily in purchasing equipment and expanding their mining infrastructure.
However, the long crypto winter of 2022 left these firms vulnerable and led some into financial crisis. The liabilities negatively impacted their financial position during the 2022 bear market. The report reveals that public bitcoin miners have over $4 billion in liability, while top BTC mining debtors collectively owe nearly $2.5 billion.
This huge debt and high energy hampered the operation of these firms during the winter when profits were low. Most of them have struggled to maintain minimal operating standards, while some have struggled to keep up with production costs. As a result, leading Bitcoin mining-Companies like Core Scientific have no choice but to file for bankruptcy.
Bitcoin spike Mining Stocks increases the performance of BTC ETFs
BTC price rebound in January is a breath of fresh air for miners. The once-declining crypto mining stocks have just made new all-time highs. These recent performances rubbed off on BTC exchange-traded funds (ETFs) as well. Data shows that BTC ETFs have outperformed most stock ETFs.
After a year of turbulence, ETFs recaptured the top positions in the performance charts in January 2023. Valkyrie’s Bitcoin Miners ETF (WGMI) outperformed the stock ETF market with a 40% gain year-to-date.
Lead ETF analyst at Bloomberg Eric Balchunas explained that Valkyrie Bitcoin Mining ETF is very dense, with investments in just 20 companies including Intel, Bitfarm and Argo Blockchain.
The WGMI ETF was listed on the Nasdaq market in February 2022, but did not include direct BTC investments. Instead, most of its net worth (at least 80%) provides exposure to Bitcoin through securities 50% of its profits come from BTC mining. Valkyrie invested the remaining 20% in companies that have Bitcoin as a large part of the assets held.
Bitcoin price is trading above the $21,000 zone l BTCUSDT on Tradingview.com
In general, crypto ETFs performed poorly in 2022 due to the ongoing bear market. But things appear to be returning to normal as Bitcoin is reclaiming lost ground. BTC is currently trading at $21,248 in a 24-hour price change.
Featured image from Pixabay/ WorldSpectrum, charts from Tradingview
Source: Crypto News Deutsch