Bitfarms, one of the largest BTC miners, posted a 140% increase in the first two weeks of January, followed by Marathon Digital Holdings Inc. by 120%. Hive Blockchain Technologies Ltd. Its shares nearly doubled in value in the same period while the MVIS Global Digital Assets Mining Index rose 64% in the first month as well.
The Luxor Hashprice Index, which aims to quantify how much miners can make from the processing power used by the Bitcoin network, is up 21% this year. This partly reflects greater rewards due to the increase in the price of Bitcoin.
The bull race in 2021 has prompted many mining companies to go public while others have invested heavily in equipment parts and expansion. However, a prolonged winter in 2022 exposed weaknesses and lack of proper structuring in many of these mining companies.
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The 2021 bull market saw a significant increase in borrowing by the bitcoin mining industry, which had a negative impact on its financial position during the next bear market. Public bitcoin miners owe more than $4 billion in liabilities while the 10 largest bitcoin mining debtors collectively owe nearly $2.6 billion. By the end of 2022, prominent bitcoin miners like Core Scientific have filed for bankruptcy.
Public bitcoin mining companies with the highest debt. Source: Hashrate Index
Not only did the BTC price rally in January help crypto mining stocks struggle to reach new yearly highs, but it also helped Bitcoin-based exchange-traded funds (ETFs) outperform most traditional stock market ETFs as well.
