Crypto Stocks Fall in 2022: Are Bitcoin Miners Doomed?
What a difference a few months in the market can make. Last year’s darlings, cryptocurrency miners, are now becoming an endangered species – with some avowedly at risk of bankruptcy.
Last year’s standout performer, Argo Blockchain (ArgB), revealed it was struggling to find (and keep) investors. This comes just days after another publicly traded miner, Core Scientific (CORZ), filed for bankruptcy with the Securities and Exchange Commission (SEC).
Bitcoin miners’ income comes from — well, bitcoin — but their share prices haven’t fallen in line with the crypto king — they’ve sunk much deeper. As of November 1, 2022, bitcoin (BTC) is down 56% in 2022, while most major miners are trading 70-90% below their year-to-date value. Why? And can the sector recover?
Argo Blockchain (ArgB) share price
Falling bitcoin (BTC) price, rising energy prices
At the height of the anniversary of the cryptocurrency market in 2021, the reward for one mined bitcoin was $69,000. By the 3rd quarter of 2022, the reward was reduced to $20,000. Bitcoin mining is inherently cyclical, and the bear market should always be a drought.
But in what has been a perfect storm for bitcoin miners, this particular bear market has been coupled with skyrocketing energy prices and rising costs for miners further straining their balance sheets.
“To compound the problems, mining companies are turning to native crypto lenders for liquidity despite higher interest rates and strict collateral requirements,” notes Dessislava Aubert, research analyst at cryptocurrency market data provider Kaiko.
Core Scientific share price (CORZ)
Bitcoin (BTC) vs. bitcoin miners performance
The sector is now down an average of 70% in 2022.
Marathon (MARA), Riot (RIOT), Hut 8 Mining Corp. (HUT), HIVE Blockchain Technologies (HIVE) are down 60%, 70%, 70%, and 78% year to date, respectively.
The embattled Core Scientific, (CORZ) is trading a staggering 98% below its value at the start of the year.
Some smaller miners – such as BIT mining and Digihost – are even facing delisting from the New York Stock Exchange (NYSE) and Nasdaq due to their share prices falling below the $1 threshold.
Bitcoin (BTC) beats most bitcoin miners. — Kaiko.Terrible prospect?
Can the sector recover, or will the dire situation continue, potentially leading to a wave of mergers and acquisitions?
According to Kaiko’s Aubert, the sector may be in for several “lean years” and mergers and acquisitions.
“The move towards sector consolidation is likely to continue as market conditions remain challenging,” she says. “Investors have reduced exposure to crypto (and risk assets in general) and this dynamic will remain until global central banks pivot.”
The sector will also be helped by the energy crisis to calm down, as miners need “extremely cheap energy to be profitable”, according to bitcoin mining analyst Jaran Melleurd points out.
COIN is underperforming BTC
While bitcoin mining has been particularly hard hit, other crypto-related stocks are also outperforming bitcoin.
Cryptocurrency exchange Coinbase ( COIN ), which listed on the Nasdaq with much fanfare last year during a crypto bull run, is now down 73% — twice as much as Robinhood ( HOOD ) — a trading platform that stocks a variety of cryptocurrencies. but offers trading in other asset classes. HOOD is down 37% YTD.
Largest corporate owner of bitcoin
Meanwhile, MicroStrategy ( MSTR ), the world’s largest owner of bitcoin companies, which reported a staggering $1 billion loss on its bitcoin holdings in August and became a target for short sellers, is outpacing bitcoin.
US software and business analytics company MicroStrategy has lost 52% in 2022 so far.
MSTR’s core business is not directly related to bitcoin or other cryptocurrencies, but it is the world’s largest corporate owner of bitcoin. The company vowed to stick with increasing its bitcoin holdings despite the losses.
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