Bitcoin mining stocks have experienced impressive gains in 2023, outperforming the price of BTC itself. The top nine public Bitcoin mining firms have recorded an average year-to-date gain of 257.14%, almost three times higher than BTC’s gain during the same period. These stocks benefit from a leveraged beta effect, meaning they tend to outperform during upward trends in Bitcoin’s price and face greater downside risks during market downturns.
While mining companies are positioning themselves for long-term growth by expanding their operations and purchasing more machines, the accumulation levels in the mining sector do not match previous bull markets. This suggests that the current uptrend in mining stocks could potentially stall in the medium term.
Mining Companies Make Expansive Moves
Several mining companies made significant expansion moves in June, contributing to positive sentiment and long-term value for the stocks. Hut 8 Mining Corp., Cleanspark, and Riot Blockchain are among the companies that increased their hashrate capacity through mergers, investments, and partnerships. However, on-chain data reveals that miners have been selling off a significant portion of their holdings, possibly indicating a forthcoming downturn.
Notably, short interest in Bitcoin mining stocks such as Marathon Digital Holdings, Riot Platform, and Cipher Mining has increased, potentially due to excessive debt and stock dilution, negatively affecting existing shareholders’ profitability.
Mining Profits Improve, but Miners are Selling
Furthermore, data indicates that miners have been transferring their coins to exchanges at levels surpassing those seen during the 2021 bull market. Miner holdings remain near a two-year low, likely due to low profitability in 2023. Although Bitcoin’s price has risen above $30,000 and mining profitability has improved, miners continue to spend on expansion and operational costs, suggesting that a full-fledged crypto bull market has yet to commence.
Considering the expansion plans of mining companies and the decline in on-chain miner holdings, the article projects medium-term sideways price action or a potential correction in mining stocks if the price of BTC drops.
Please note that this article does not provide investment advice or recommendations. It is crucial for readers to conduct their own research before making any investment decisions.