Miner Stocks Fall Despite Bitcoin's Rise
Mining stocks fell 27% this week despite a Bitcoin rally that sent the asset to the $64,000 mark.
Some major mining companies' shares have plunged over the past three trading days, despite Bitcoin performing incredibly well over the same time period. The losses were suffered by Marathon Digital Holdings (MARA), whose shares fell 18.5%. Riot Platforms (RIOT) lost 21.9%. CleanSpark (CLSK) shares fell to 27.5% and TeraWulf (WULF) fell to 25.4%.
Peter Schiff, founder of Euro Pacific Asset Management, was the first one to draw attention to it and linked the fall to the problems of the cryptocurrency itself. Other analysts suggested that the decline in shares of large mining companies was due to fears about the upcoming halving and rushed to get rid of the shares.
$CLSK ran from $3 to $24 in 4 months and people were still “waiting” for the real run to start. In fairness I thought $35 would hit, but after watching miners while $BTC rose to 65k, I quickly changed my tune on miners. Not to mention insiders and upper management started selling…
— Chris (@StonkChris) February 29, 2024
These concerns are shared by the owners of large mining companies themselves, who suspect that the April event will not only have a negative impact on the shares of their companies, but will also force them to go offshore. Analyst Bradley Dean determined that the largest Bitcoin mining countries right now are the United States, China and Russia, but that could change in 1-2 years as more companies open up to markets in Africa and Latin America, where electricity tariffs are much lower.
The biggest #bitcoin mining countries are:
— Bradley Dean (@TBG9270584) February 17, 2024
1) The United States 🇺🇸(40%)
2) China 🇨🇳(15%)
3) Russia 🇷🇺(12%)
This map will look very different in 1-2 years as miners in Africa and Latin America expand operations.#Bitcoin mining ⛏️ rigs will ruthlessly hunt down the cheapest… pic.twitter.com/KD50g9mWHe
Jaran Mellerud, founder and chief mining strategist at Hashlabs Mining, also recognizes the potential issue that could arise after halving and expects some Bitcoin hashrate to move from the U.S. to countries with lower electricity costs.
Bitcoin mining is one of the least risky industries in the world if you are among the lowest-cost operators.
— Jaran Mellerud 🟧⛏️🇳🇴 (@JMellerud) February 18, 2024
The Bitcoin halving is expected to happen in as early as 51 days. The event will reduce Bitcoin miners' rewards from 6.25 BTC to 3.125 BTC. During the last halving event on May 11, 2020, the Bitcoin price was $8,750, and five months later in October, it rose from $11,500 to $61,300 by mid-March 2021.
However, there may not be a significant jump in price after the halving event and then a significant portion of players in the mining industry will have to shut down their rigs.
To maintain their profitability, miners are forced to adapt to the conditions. One of such ways is by selling off Bitcoin reserves. Over the past 12 months, miners' reserves have been reduced by 26,000 Bitcoins, which is roughly $1.8 billion. Analysts at J.P. Morgan believe that after the halving, selling pressure from miners will intensify and the hype around ETFs will subside, causing Bitcoin to fall towards the $42,000 mark. This mark is the average cost of mining after the halving for large companies.
