Quick Take
Over the past three months, the Bitcoin landscape has presented a striking anomaly. Bitcoin, the flagship cryptocurrency, has experienced a 20% surge, climbing near its year-to-date (YTD) high, around $35,000. Conversely, this upward momentum appears to have bypassed Bitcoin mining stocks, which have reported a substantial decline.
Prominent mining stocks such as Cleanspark, Bitfarms, Hut 8, and WGMI all recorded declines between 15% and 25%. More dramatically, Riot Blockchain and Marathon Digital Holdings saw reductions of 32% and 39%, respectively, while Iris Energy reported a substantial 41% drop. This divergence is especially significant given Bitcoin’s performance.
The crux of this divergence could be traced back to the forthcoming Bitcoin halving event scheduled for April 2024. Bitcoin mining stocks are essentially valued based on the anticipated future cash flows generated through Bitcoin, according to analyst Caleb Franzen. With the block rewards expected to halve post the event, market speculation suggests that the price of Bitcoin would need to double to maintain the sustainability of these businesses equivalently to pre-halving levels, according to Franzen.
In essence, the current market sentiment might reflect a lack of confidence that Bitcoin’s price will need to rise significantly.
| Mining Stocks | 3 Month Performance |
|---|---|
| Cleanspark | -15% |
| Bitfarms | -20% |
| Hut 8 | -25% |
| WGMI | -18% |
| Riot Blockchain | -32% |
| Marathon Digital Holdings | -39% |
| Iris Energy | -41% |
| Bitcoin | 20% |
Source: Trading View
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