Public Miners Outperform Bitcoin
The recent rise in bitcoin prices has not stopped public bitcoin mining stocks from making impressive gains. Subscribe now to be among the first to get these insights and other on the-chain bitcoin market analysis right to your inbox. We’ve seen a decline in bitcoin holdings across public miners through 2022, from 46.930 BTC at peak April 2022 to 31,892 January 2023 — a 32% decrease in just 10 months. Public miners’ bitcoin holdings are now concentrated in Marathon Digital and Hut 8, with Northern Data, Core Scientific, and Northern Data all having withdrawn their bitcoin.
The trend in hash rate growth is “up only”, with public miners increasing their hash rate by 129% in the past year. This has been a major driver of overall hashrate expansion, with the network’s hash rate reaching 300 EH/s recently and public miners accounting for nearly 25% of all hashrate on any given day. This percentage is not representative of all public miners like Cipher or Terawulf.
Mining Production Update NotesMarathon stated that they had made the decision to sell some bitcoin that they had mined. “With bitcoin production increasing, we made the strategic choice to sell some of the bitcoin, as previously planned to cover some operating expenses and for general corporate purposes. To fund our monthly operating costs, we will continue to sell a portion if our bitcoin holdings in 2023. They also shared information about areas for further hash rate growth in their announcement. “The company expects to still have approximately 23 EH/s capacity installed by the middle of 2023. HIVE also updated shareholders on bitcoin sales. “HIVE sells all Bitcoin earned from our GPU mining havehrate with a focus on HODLing the green Bitcoin mined using ASICs,” HIVE said. Riot Platforms announced that their timeline for growing their hashrate has been delayed. “Unfortunately, due to this damage, our previously stated target of reaching 12.5 EH/s total hashrate capacity in Q1 2023 will be delayed. As we gain more clarity about the impact on our planned deployment schedule, we will provide further updates. The remaining infrastructure build out at Rockdale Facility is progressing, with Building E at 50% completion. This quarter, it will be completed in full. We are also continuing to execute the expansion at Corsicana Facility.
Iris Energy increased its capacity to mine from 2.0 to 5.5 EH/s using prepayments to purchase new miners. Hut 8 also shared information about a recent merger. Jaime Leverton CEO, stated that they have been strategic and intentional in pursuing their HODL strategy. By building a large, unencumbered pile, we have given ourselves the option to use a portion of it strategically to cover operating expenses instead of having to look for other financing options with lower terms. “I believe that selling production while we concentrate on closing the USBTC merger is the best approach. We expect to create a strong self mining, hosting, managed infrastructure operations and HPC organization over the long-term. “Hash Rate All Time Highs” Bitcoin’s average 7-day hash rate reached new all-time highs with the help of cost-sensitive miners who turned off their rigs. This week, it was 303 EH/s.
The network hash rate is at new highs and the next difficulty adjustment is expected to be +12.0%. This will likely occur on February 25.
Due to the rise in USD-denominated revenues, the expected ratchet up in mining difficulty will reduce some of the relief operations felt in recent weeks. Miner revenue in bitcoin terms will again fall to new lows. As bitcoin hash rate and subsequent mining difficulty continue to rise, older generation machines will continue to be squeezed at the expense more efficient businesses with better mining equipment. Iris Energy led the way with a remarkable 255% gain, followed by Bitfarms and Hut 8. HIVE Blockchain was next.
These companies’ performance against Bitcoin is equally impressive, as every major public miner in the closely followed basket has outperformed its baseline (BTC) to begin 2023.
We find bitcoin outperformance to have a high probability of success over a longer time period, due to the fierce competition in the global mining industry and the decreasing block subsidy programmatically. This subsidy continues to occur approximately once every four year.
No matter what direction bitcoin or equity markets take, mining equities will continue offering investors volatility galore. The right market conditions will allow for a lot of that volatility in form of upside appreciation. Final NoteGlobal investors will find it difficult to find anything that grows and flourishes at a similar pace to the bitcoin hashrate. This is the story of the evolution of the largest, most decentralized computing force in the world. But many miss the forest for trees.
Bitcoin is the best global option for achieving a neutral, global monetary protocol for final settlement, short-term market correlations and exchange rate performance aside