Bitcoin rally powers mining stocks higher
Crypto mining stocks are performing well over a five-day period following a rise in digital asset valuations as mixed operational cost outcomes threaten sustainability
Mindscape studio/Shutterstock, modified by Blockworks
When digital asset valuations surge, crypto mining stocks naturally benefit, much like other commodity producers.
Data shows that major firms including Marathon Digital (MARA), Bitfarms (BITF) and Riot Platforms (RIOT) are posting double-digit gains over the past five days, between 17% and 19%.
Speculation for crypto mining stocks has been fueled by the crypto market rally at the beginning of the week, which saw the price of bitcoin (BTC) cement a new yearly high above $35,000.
Miners faced significant challenges last year attributable to rising electricity costs, the Ukraine-Russia conflict and falling crypto prices — sending respective share prices tumbling.
In the face of those challenges and by the beginning of this year, miners managed to recover substantial losses in their valuations by August — clawing back some 150% to 200% in year-to-date terms.
As a result, over the past 12 months, MARA has exceeded its earnings per share (EPS) estimate in 25% of instances, whereas the broader crypto mining industry has outperformed the EPS estimate 61.8% of the time during the same timeframe, TipRanks data shows.
BITF and RIOT have also managed to beat similar EPS estimates leading to a rush of new investments in the wake of the crypto industry’s rising valuations.
Operating headwinds
It comes as the spot prices for existing bitcoin ASICs continue to set all-time lows, bitcoin mining consulting firm BlocksBridge noted in its weekly miner note.
Cheaper mining equipment is helping to drive down some operational costs in the face of bitcoin’s increasing hashrate — a sign of heightened competition amongst miners, Blockworks was previously told.
While miner profitability took a hit last month due to fresh local highs in those hash rate figures, it appears the sector is retaining resiliency.
Various previous-generation models, which offer a hash rate between 25 and 38 J/TH — including the Antminer S19, Avalon 1326, and WhatsMiner M30S+ — are now priced below $10 per TH/s, BlocksBridge said.
Still, it remains to be seen whether miners can sustain their good fortunes in tandem with rising operational costs.
According to data from the US Bureau of Labor Statistics, electricity prices rose 1.1% from the month of August through to September, putting further strain on households and businesses.
However, on Monday, US-regulated digital asset services firm BitOoda noted in its weekly report Coal plants need to secure fuel a year in advance and are now accumulating more coal than they can manage.
Current coal stock levels are high compared to recent years, despite a 29 gigawatt reduction in coal capacity since 2020. This could put downward pressure on power prices in the US if plants have to operate uneconomically to deplete excess coal, BitOoda said.
“A mild winter would likely result in lower prices with coal stocks at those high levels,” the digital asset services firm said.
Get the news in your inbox. Explore Blockworks newsletters:
- The Breakdown: Decoding crypto and the markets. Daily.
- 0xResearch: Alpha in your inbox. Think like an analyst.
- Empire: Crypto news and analysis to start your day.
- Forward Guidance: The intersection of crypto, macro and policy.
- The Drop: Apps, games, memes and more.
- Lightspeed: All things Solana.
- Supply Shock: Bitcoin, bitcoin, bitcoin.
