Setbacks in the bear market have left bitcoin miners behind their gold peers
Digital gold miners suffered tougher losses in 2022 than their old peers.
The prominent memetic narrative of Bitcoin as “digital gold” requires comparison with the real yellow metal. But since the advent of Bitcoin, comparative perspectives on the mining sectors underlying both assets are too often lacking.
In May 2022, this author released data on gold/Bitcoin mining-Contrast as digital gold producers significantly underperformed ore miners. Now the time seems right to review some recent market data for bitcoin and gold mining companies.
The past year of unpredictable economic turmoil and bear market financial brutality has revealed some important quirks between gold and its counterpart Blockchain-Base highlighted. In the following paragraphs, the data will highlight similarities and differences between the two mining industries. In a way not often revealed through Twitter banter, gold and bitcoin prospectors have a lot in common.
In Bitcoin and Gold Mining Market Data
Bitcoin bulls should sit down before continuing to read this section. Peter Schiff will be euphoric.
2022 was not an easy year for anyone, but bitcoin miners suffered from particularly difficult market conditions. Compared to bitcoin miners, gold miners stocks have had a pretty easy year. A select group of public gold and bitcoin mining companies are shown in the bar chart below. The graphic shows the percentage annual performance from 2022 for all companies.
</figure><p>Gemessen an prozentualen Rückgängen von Allzeithochs gewinnt Gold wieder. (Lach weiter, Schiff.) Zum Zeitpunkt des Verfassens dieses Artikels ist Gold etwa 7 % von seinem Rekordhoch entfernt – fast derselbe Preis wie im Mai, als dieser Autor zuletzt über Gold- und Bitcoin-Miner schrieb. Unterdessen wird digitales Gold mehr als 65 % unter seinem Höchststand gehandelt, der Ende 2021 erreicht wurde.
But Bitcoin being outperformed by gold is not the historical norm. Throughout 2021, Bitcoin and its miners saw a strong and sustained uptrend. Gold and gold miners lagged significantly over the same period.
And the honey badger should never be counted.
Bear market mining brutality
Regardless of how gold miners have fared, the past year has been arguably the most difficult bear market period in Bitcoin’s history. So underperformance by gold (or any other asset) is hardly a surprise.
The following is a brief summary of what bitcoin miners have survived over the past year, which among other things has led to yellow metal ore miners underperforming.
For public mining companies, potential delisting announcements from exchanges have been all too common. In August 2022, BIT Mining received notification from the New York Stock Exchange (NYSE) of a possible delisting due to floor pricing standards. That same month, Mawson received notice of a possible delisting for the same reason. In October 2022, Digithost received the same notification of a possible delisting as reported by The Block. Greenidge Generation received notice of a potential delisting in mid-December 2022. Bitfarms received a similar notice a day after Greenidge for the same reasons. And Canaan, a Nasdaq-listed mining hardware maker, also received a notice of possible delisting because it used an auditor whose work cannot be audited by the U.S. Accounting Service.
Mining Managers also left the company in droves – voluntarily or otherwise. Dave Perrill, former CEO of Compute North, resigned in September 2022. Jeffrey Kirt, who has led Greenidge Generation since 2021, abruptly resigned in early October 2022. Whitney Gibbs, co-founder of Compass Mining, also abruptly resigned amid “setbacks and disappointments” in July 2022. Emiliano Grodzki, who co-founded Bitfarms in 2017, announced his retirement three days before the end of 2022.
Mining bankruptcies made headlines every month last year. Compute North filed for bankruptcy in September 2022. The company raised $385 million seven months before bankruptcy. Core Scientific, the largest publicly traded bitcoin mining company, also filed for bankruptcy just days before Christmas. Celsius, a prominent crypto lending platform, also saw its sizable mining unit go bankrupt just months after the team announced it was going public. BlockFi was another well-known crypto lending service that had a sizable mining operation and has filed for bankruptcy. Bloomberg reported that Marathon disclosed a commitment of over $80 million to now-bankrupt Compute North. argon accidentally posted fully prepared bankruptcy filings on its website ahead of a $100 million deal with Galaxy Digital’s mining team helped Argo avoid “real” bankruptcy.
And many mining lawsuits have been filed. Blockware was sued. Iris Energy faced a class action lawsuit. Washington County, Tennessee, is suing BrightRidge, a local mining company. Riot sued Northern Data. Whinstone, Riot’s flagship mining subsidiary, is suing Japan’s CMO Internet in a four-year lawsuit. And Core Scientific was sued.
Suffice to say, the mining teams that survived the past year will likely survive it all.
Darkest before dawn?
Given the market conditions in the bitcoin mining sector over the past year, it would come as a shock to any investor if bitcoin miners outperformed their gold counterparts. But does a year of underperformance impact bitcoin’s long-term potential? Definitely not. The usefulness of this comparison only serves as additional context for the ongoing expectation that digital gold will gradually but steadily market capitalization will be absorbed by physical gold.
However, Bitcoin is as volatile as it is valuable. Even in January, bitcoin miners are roaring back as the price of bitcoin itself soars. Now all miners hope that last year was the “darkest” and “dawn” will come soon.
This is a guest post by Zack Voell. The opinions expressed are solely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
Source: Crypto News Deutsch
