While Bitcoin has nearly doubled in value since the beginning of the year, one of its close neighbors in the investment world has proven to be a more profitable buy: mining companies.
Almost all publicly traded Bitcoin mining companies have risen more than 100% since January 1, benefiting from Bitcoin’s rising value and positive trading developments.
Bitcoin miners vs. BTC
Shares of Marathon Digital (MARA), one of the largest public miners by hash rate, are currently up 158% year to date.
Meanwhile, shares of competitors such as renewables-focused Iris Energy (IREN) and Riot Platforms (RIOT) rose 168% and 186%, respectively.
Mining companies make money by running powerful and expensive computer equipment to mine the next block of Bitcoin, to which a fixed portion of new Bitcoin is tied. As such, as the value of Bitcoin rises, the dollar-denominated value of their rewards, and thus their profits, also rises.
So far, Bitcoin has risen 90% in 2023, driven largely by a series of US bank failures in March that shook confidence in the traditional financial system.
It’s also up on excitement that a spot Bitcoin ETF may finally get approval before the end of the year, in light of filings from BlackRock and crypto industry court victories.
Bitcoin rose 5.6% to $31,600 on Monday alone, as an appeals court formally ordered the Securities and Exchange Commission to review Grayscale’s Bitcoin ETF (GBTC) application. Like mining companies, GBTC stocks have also outperformed Bitcoin this year, rising 201%.
Miners prepare for halving
Generally speaking, Bitcoin’s neighbors have a higher beta than Bitcoin itself, meaning they are subject to greater volatility in both directions. For example, the value of Coinbase (COIN), the only publicly traded cryptocurrency exchange, has risen 129% this year.
However, the mining industry has taken unique steps this year to enhance its value proposition for investors. First, companies like CleanSpark (CLSK) — up 111% — announced multiple major investments in cutting-edge Bitcoin mining hardware this year, boosting their ability to win new Bitcoin.
Investments like these from CleanSpark and others have helped push the total Bitcoin hash rate to several new highs this year, and Reduced cost Old mining hardware that has become less efficient over time.
Miners are also diversifying: several companies including Iris, HIVE, Applied Digital and others have moved beyond Bitcoin mining to cloud/HPC computing services using their existing infrastructure. Many companies have claimed that these services are more profitable per unit of energy than Bitcoin mining.
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