The Bitcoin (BTC) price rally to a multi-month high has also positively affected mining stocks. Many crypto mining stocks posted their best monthly performance in a year. Rising mining shares also relieved struggling miners who had to sell a significant portion of their mined coins to increase liquidity in 2022.
Bitfarms, one of the top BTC mining companies, saw a 140% rise in the first two weeks of January 2023, followed by Marathon Digital Holdings with a 120% rise. Hive Blockchain Technologies saw its share value nearly double in the same period, while the MVIS Global Digital Asset Mining Index surged 64% in the first month of the new year.
The Luxor Hashprice Index, which aims to quantify how much a miner could earn from the processing power used by the Bitcoin network, has risen 21% this year. This partly reflects higher rewards due to an increase in the price of Bitcoin.
The bull run in 2021 led several mining companies to go public, while others invested heavily in equipment and expansion. However, a prolonged crypto winter in 2022 exposed vulnerabilities and a lack of proper structuring at many of these mining companies.
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The 2021 bull market saw a significant increase in borrowing from the Bitcoin mining industry, which had a negative effect on its financial situation during the bear market that followed. Public Bitcoin miners owe more than $4 billion in liabilities, while the top 10 Bitcoin mining debtors collectively owe nearly $2.6 billion. In late 2022, major BTC miners like Core Scientific filed for bankruptcy.
BTC’s price surge in January helped push struggling crypto mining stocks to new yearly highs, but it also helped Bitcoin-based exchange-traded funds outperform most of the traditional stock ETF market.
