The Outperformance of Mining Stocks
The year-to-date returns of most mining stocks have surpassed the rise of Bitcoin. According to CoinGecko data, all mining stocks except Argo Blockchain and TeraWulf have outpaced Bitcoin’s 84.61% increase. The average return for the top eleven public mining companies stands at 148.59%. Marathon Digital Holdings and Cipher Mining lead the gains with year-to-date increases of 120.67% and 356.00%, respectively.
Higher Beta and Volatility
Mining stocks have exhibited a higher beta compared to Bitcoin, indicating increased volatility and a tendency to move in the same direction as the market or benchmark index. During positive rallies, mining stocks often outperformed Bitcoin. Conversely, during Bitcoin’s downturn in the third quarter, mining stocks retraced by an average of 50% while Bitcoin dropped by around 10%.
New Use Cases Boosting Mining Profitability
Renewed excitement and market performance surrounding Bitcoin are benefiting mining companies. New use cases such as Ordinals inscriptions and BRC-20 tokens are increasing profitability and demand for mining. Anthony Power, a mining analyst at Compass Mining, reported increased production and greater mining revenues in September due to Bitcoin’s price increase and a temporary negative adjustment in mining difficulty.
Mining Difficulty and Halving Impact
Mining difficulty is an automatic parameter in Bitcoin’s design that adjusts based on network hashrate. Despite the ongoing bear market, the network’s hashrate has steadily risen this year, leading to a new all-time high in mining difficulty. Miners will also face the upcoming halving event, which reduces their rewards for verifying transactions by 50% every four years.
Conflicting Views on Mining Stocks
Opinions on mining stocks leading up to the halving vary. Some experts believe that miners can benefit from the initial excitement around the event, but they will eventually face reduced rewards and business model challenges. Others are bearish on mining stocks, expecting underperformance for several months after the halving. Less efficient miners may struggle or be taken over by more efficient ones if Bitcoin fails to reach certain price levels.
Hot Take: The Performance of Mining Stocks and the Halving
Mining stocks have shown impressive performance this year, outpacing Bitcoin’s rise in value. However, the upcoming halving event poses challenges for miners as their rewards will be reduced by 50%. While some experts are optimistic about mining stocks leading up to the halving, others expect underperformance due to the reward reduction. The success of mining companies will depend on Bitcoin’s price trajectory and individual miners’ financial and operational preparations. As the industry adapts to changes in profitability and market conditions, it remains to be seen how mining stocks will fare in the post-halving landscape.
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