Where top crypto miners stand as stock prices tumble

Mining company stock prices plummeted in recent weeks as bitcoin’s price hit a snag — sending the market capitalizations of top miners into a tailspin.

Operators with the most stable power deals are positioned to outlast competitors heading into the bitcoin halving, an industry executive told Blockworks.

The combined market cap of Riot Blockchain, Marathon Digital, Canaan Inc., Hut 8 Mining and Cipher Mining Technologies fell by about 30% in the past month, according to data published Tuesday by AltIndex.com.

The combined figure fell to $6.7 billion last week after hitting $9.5 billion in July, according to the data aggregated from YCharts and CompaniesMarketCap.

Stock prices of miners are highly correlated to the price of bitcoin (BTC), according to Didar Bekbauov, CEO of bitcoin joint mining company Xive. He noted that bitcoin’s price increase from roughly $16,000 to $30,000 earlier this year boosted mining company revenues, sending their stock prices significantly up.

Many mining stocks significantly outperformed bitcoin, as well as fellow crypto-related stocks like MicroStrategy and Coinbase, during the first half of 2023 — with a handful up more than 200% over that span.

But bitcoin’s price plummeted last week, since rebounding slightly to about $26,000 by 2:30 pm ET Thursday. Bitcoin mining difficulty — a figure reflecting how challenging it is to find a valid hash below a given target — is up about 6% in the last seven days, according to CoinWarz data.

“The recent drop in bitcoin price and increased mining difficulty made the revenues of miners smaller, which changed investors’ perspectives,” Bekbauov said.

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Bitcoin was down 10.8% from a month ago, as of Thursday afternoon.

The stock prices of Riot Blockchain and Marathon Digital — the two largest public miners by market cap — were down about 40% and 36%, respectively, in the last month.

Hut 8’s price was down roughly 32% in that span, while Canaan and Cipher Mining’s stocks dropped about 29% and 23%, respectively, from a month ago.

“This slump in market capitalization can make getting funding in capital markets quite harder, which can affect the development of new projects,” Bekbauov said.

Miner outlook heading into halving

In addition to the bitcoin price drop and investors rotating to other sectors, Peter Stoneberg, a managing director at crypto advisory firm Architect Partners, in a statement attributed the miner stock price dips to “halving overhang.”

Set for April 2024, the next bitcoin halving — which reduces per-block rewards from 6.25 BTC to 3.125 BTC — is expected to put stress on the segment.

“In the mining market, electricity is the main expense for generating bitcoin and whoever has the best deals will outcompete others in the long term,” Bekbauov said.

Riot Platforms, therefore, is among the most well-positioned, he added. The miner has a 10-year energy deal with TXU Energy that facilitates electricity purchases at roughly 2.5 cents per kilowatt hour (KWH). It expires in 2030.

Fred Thiel, CEO of competing firm Marathon Digital, noted during the company’s latest earnings call that access to energy at a low cost would be key when considering acquisition opportunities among financially stressed competitors.

“It’s got to be somebody that has an absolute amazing [power purchase agreement],” Thiel said at the time of firms Marathon could consider buying. “Or access to a very low energy cost and a facility where you can essentially pull out old machines and put in brand new, super efficient machines.”

Riot reported having $289 million in cash on hand at the end of the second quarter, while Marathon said it had about $114 million in unrestricted cash. Riot and Marathon held 7,275 BTC and 12,964 BTC, respectively, at the end of July.

Despite Hut 8’s year-over-year revenue and bitcoin production dropping considerable during the second quarter, the company seeks to find strength in diversification via its high-performance computing services, for example.

Hut 8 had $26.7 million CAD (or $19.7 million US) in available cash and a bitcoin stack of 9,136 BTC, as of June 30.

Cipher Mining Chief Financial Officer Ed Farrell said during the company’s second quarter earnings call that its “unit economics” — finding low cost power, not overpaying for mining rigs during bull markets or avoiding burdensome debt — “is a critical part of our ability not only to survive but come out of winter on the other side of the halving.”

The company reported having $1.7 million in cash on its balance sheet, at the end of the second quarter, and roughly $10.5 million worth of BTC.

Canaan Inc. is set to report its second quarter results on Aug. 29.

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