While Bitcoin has nearly doubled in value since the start of the year, one of its close neighbors in the investment universe has proven a more profitable buy: mining companies.
Nearly all publicly-traded Bitcoin mining firms have soared over 100% since January 1, benefitted by both BTC’s rising value and positive business developments.
Bitcoin Miners VS BTC
Shares for Marathon Digital (MARA), one of the largest public miners by hashrate, are currently up 158% year to date.
Meanwhile, rivals like the renewables-focused Iris Energy (IREN) and Riot Platforms (RIOT) have surged 168% and 186% respectively.
Mining companies earn money by running powerful and expensive computer equipment to mine Bitcoin’s next block, to which a fixed portion of new BTC is attached. As such, as Bitcoin’s value rises, so does the dollar-denominated value of their rewards, and thus their profits.
Thus far, Bitcoin is up 90% in 2023, spurred largely by a series of U.S. bank failures in March that shook confidence in the traditional financial system.
It’s also rallied on excitement that a spot Bitcoin ETF may finally receive approval before the end of the year, in light of applications from BlackRock and crypto industry court victories.
Bitcoin rallied 5.6% to $31,600 on Monday alone as the Court of Appeals officially ordered the SEC to review Grayscale (GBTC)’s Bitcoin ETF application. Like mining firms, GBTC shares have also outperformed Bitcoin this year, rising 201%.
Miners Preparing For Halving
Generally speaking, Bitcoin-adjacent companies have a higher beta than BTC itself, meaning they are susceptible to greater volatility in both directions. Coinbase (COIN), for example, the only publicly traded crypto exchange, is up 129% this year.
However, the mining industry has made unique strides this year to boost its value proposition to investors. Firstly, firms like CleanSpark (CLSK) – up 111% – have announced multiple major investments in the latest Bitcoin mining hardware this year, bolstering their capacity to win new BTC.
Such investments from CleanSpark and others have helped drive Bitcoin’s total hashrate to many new highs this year, and lowered the cost of old mining hardware that’s become less efficient over time.
Miners are also diversifying: many firms including Iris, HIVE, Applied Digital, and others have moved beyond Bitcoin mining and into cloud computing / HPC services using their existing infrastructure. Multiple firms have claimed that such services are much more profitable per unit of energy than Bitcoin mining.