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- Top publicly Bitcoin mining companies, namely RIOT, MARA, BITF, and HUT, have been surpassing the Bitcoin Price since October 2020, when hash price bottomed.
- While the shares of the four largest publicly traded mining firms were more than 5,000% in the past 12 months, Bitcoin was only up 900% over the same period.
- Miners are more likely to surpass bitcoin as the hash prices notably increase due to the valuations in equity markets and the capital structure of their business.
The Share Prices of Top publicly Bitcoin mining firms- RIOT, MARA, BITF, and HUT, have drastically outperformed the BTC in the past 12 months, even after the firms were operating at losses.
More often than not, it could be because the publicly-traded equities are valued using the multiple of their cash flows/ current earnings.
Miner Hash price started to boom towards the last quarter of 2020. Therefore, the revenue and public miner market capitalizations followed. Hash price is measured by dividing the hash rate by miners’ revenue. (dollar per terahash particularly)
In October 2020, when the hash price bottomed, Hash Miners have surpassed BTC by a considerable gap since then only, due to the increase in the hash price by 400% between that period.
Crypto miners will likely outperform Bitcoin as hash price remarkably increases due to the valuations in equity markets and capital structure of their business; this is what could be gathered by the evaluation of publicly-traded miners’ performance against Bitcoin itself.
Nonetheless, over the long period, the bitcoin revenue for every mining company is bound to decrease in Bitcoin terms, and because of the dreadfully large earnings multiples that firms trade currently within market equities in a zero interest rate world, and bitcoin mining equities also tend to zero over time in Bitcoin terms.
With each subsequent halving, as the hash rate rises and issuance decreases, Bitcoin’s denominated hash price is programmatically descending to zero.
Leeor Shirmon, Fundstrat’s vice president of digital asset strategy, shared his market performance analysis of Marathon Digital Holdings, Riot Blockchain, Hive Blockchain, and Hut 8, the four largest publicly traded mining firms. Each of these firms holds a market capitalization of more than $1 billion.
For the last 12 months, Shimron noted that the average return for shares in the mining firms is around 5000%, and during the same period, BTC has gained over 900%. Quite predictably, the stocks were found to have a “high positive correlation” with BTC.
As concluded by the researchers, for every 1% of price fluctuations in BTC, Bitcoin mining shares experience a movement of 2.5%.
However, this is applied to both upward and downward moves of the prices, which means that it is more likely that the mining stocks will decline with double the intensity of BTC throughout the bearish conditions of the market.
Shirmon also noted that “They’ll probably be hit hard as Bitcoin draws down.”
Further, owing to the wild volatility in miner stocks to the absence of regulated investment products in the U.S, considering that “Until a Bitcoin ETF is approved, investors may view public crypto mining companies as one of the only ways to get exposure to Bitcoin.”
Shimron also explained, “Since the primary source of revenue is Bitcoin, these companies are fundamentally long [on] the industry — so investors are essentially making a ‘picks and shovels’ bet when they invest in miners,”
Shirmon also pointed out that the supply chain distribution during the pandemic has benefited the four largest mining companies- they stocked up on the next -generations of hardware such as Bitman’s Antminer S19 series.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
