By
Steve Muchoki
April 19th, 2024
A strong 28% jump in the BTC over the last two weeks has given crypto miners some relief after they faced acute financial stress last year.
The strong rebound in the Bitcoin (BTC) price earlier this week has had a very positive impact on the crypto mining stocks. Stocks of the crypto mining firms have recorded their best monthly performance in over a year.
This has relieved the troubled miners a bit who had to sell a significant portion of their mined Bitcoins to boost liquidity last year in 2022. Just within the first two weeks of 2023, the top BTC mining firm Bitfarms saw a 140% surge in its stock price. Similarly, the stock of Marathon Digital Holdings clocked a 120% surge. During the same period, Hive Blockchain Technologies saw its stock value jump by 100%.
With the Bitcoin price advancing by more than 28% since the beginning of 2023, the 20-member MVIS Global Digital Assets Mining Index has gained more than 64% so far. This has been the best month for the index since its inception at the end of 2021.
At the same time, the Luxor Hashprice Index which measures how much a miner can expect to earn from the computing power dedicated to the Bitcoin network is up by 21% this year. It shows that a higher Bitcoin price leads to bigger rewards.
Will Crypto Mining Stocks Continue to Surge Further if Bitcoin Price Grows?
Despite the recent pump in the BTC price, it is still trading at a 70% discount from its all-time high of $69,000. After last year’s digital asset rout, cash-strapped miners have been reducing loans after facing acute financial stress.
Just last month in December, Core Scientific, the largest Bitcoin miner by computing power declared bankruptcy. Matthew Sigel, head of digital-asset research at fund manager VanEck warned about the substantial debt levels of many crypto miner, along with the sharp slide in the price of Bitcoin mining rigs. Sigel added:
“It appears more attractive to start a new Bitcoin mining venture than to try to pick the bottom in many of these listed stocks right now”.
As inflation cools, the broader markets have turned optimistic that further interest rate hikes won’t be aggressive. As a result, riskier investments like crypto have rallied since the beginning of 2023. But if this market narrative shifts, the quick gains in crypto could reverse very fast.