Why most bitcoin mining stocks are down amid a persistent crypto rally

Bitcoin mining stocks have struggled in recent weeks despite BTC’s relentless price rally.

Market concerns related to the upcoming bitcoin halving are the main reason, segment observers noted. The halving is expected to occur in late April, at a block height of 840,000.

Mining behemoth Marathon Digital — with a standout energized self-mining hash rate of 28.7 exahashes per second (EH/s) — was down 20% from a month ago, as of 12 pm ET Wednesday.

The stock prices of rival companies Riot Platforms, Bitfarms and Bitdeer also hover around the 20% decline mark over that span.

Hut 8, which merged with US Bitcoin Corp in November and switched its CEO last month, is down 11.5% from a month ago.

Core Scientific, which emerged out of bankruptcy in January, has fared a bit better, dipping about 8% in the last 30 days. Cipher Mining’s stock is down just 2% from a month ago.

Las Vegas-based miner CleanSpark has bucked the downward trend, with its share price seeing a 10% gain over the past month.

The recent underperformance of most mining stocks comes just weeks before the next bitcoin halving, during which per-block rewards for miners is set to drop from 6.25 BTC to 3.125 BTC. Such an event occurs roughly every four years.

Compass Point Research & Trading analyst Joe Flynn said in a Feb. 27 research note that he expected miner stock volatility to continue in the 50-day leadup to the halving, followed by “eventual short-term weakness related to hash price declines.”

Hash price — taking into account bitcoin price, network difficulty, block subsidy and transaction fees — measures how much a miner can expect to earn from a specific quantity of hash rate. It is positively correlated to BTC price changes and negatively linked to fluctuations in bitcoin mining difficulty.

Bitcoin’s price has risen more than 20% since Flynn’s Feb. 27 note was published.

“We think the market is trying to determine the equilibrium levels of BTC price and hash rates and the near-term impact on profitability as a result of the halving,” Flynn told Blockworks Tuesday.

Bitcoin’s price stood at about $72,800 on Wednesday at 12 pm ET — up about 14% from a week ago, but down from its high of more than $73,600 reached earlier in the day.

It remains to be seen if there will be a pre-halving correction in BTC prices similar to prior cycles, Flynn noted.

“But after hash prices decline post halving, we expect strength in miner stocks…with BTC price growth outpacing the rate at which new machines can be installed or come back online,” he added.

Other factors currently ‘bothering markets’

The concerns for miners ahead of the halving are “warranted,” said Dan Weiskopf, a co-portfolio manager of the Amplify Transformational Data Sharing ETF (BLOK). Not every miner will survive the halving, he added.

The hash rate from a portion of certain application-specific integrated circuit (ASIC) models are likely to go offline when the halving changes the breakeven revenues for such machines.

Home retail miners, smaller private operations and miners in areas with higher power costs are particularly at risk of ceasing operations, segment observers have said.

“The higher BTC price has led to concerns around miners who have not upgraded their equipment staying on line longer rather than shutting, since they can afford to run less efficient equipment when BTC price is at current levels,” Weiskopf told Blockworks.

Another factor currently “bothering markets” is the proposed 30% excise tax on miners’ energy usage, the BLOK co-portfolio manager argued.

The Biden administration first floated such a tax on miners last year, citing environmental concerns. That possible tax appeared again in the US Department of Treasury’s 2025 revenue proposals.

Weiskopf said allocating to miners will continue to be a key strategy for BLOK — a fund that has CleanSpark, Marathon and Riot among its top 12 holdings.

He added that he expects bitcoin’s price to trend higher, with dips being absorbed by institutions buying spot bitcoin ETFs.

“A higher price from here will make the miners reach cash flow goals faster than planned and enhance [return on investment], and we would expect many of the miners we own to build out their facilities more aggressively,” Weiskopf said. “Access to capital continues to be a competitive edge for most miners.”

Marathon Digital recently bought two mining sites in Nebraska and Texas, while CleanSpark has also sought out growth via facility acquisitions.

Marathon executives said the company was ready to use the roughly $1 billion of “dry powder” on its balance sheet in a bid to double its hash rate by the end of 2025.

Riot Platforms, which too has aggressive hash rate growth plans, had about $900 million in combined cash and bitcoin on its balance sheet at the end of 2023.

Flynn said: “We like miner stocks with the ability to grow [their] own hash rate, lower unit costs as a result of efficiency gains, and with clean balance sheets and already low power prices going into halving.”

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