Bitcoin mining firms struggles continue after Bitcoin ETF approval

In recent months, the launch of the Bitcoin ETF in January has ignited a surge in the price of BTC, delighting investors worldwide. This significant increase in Bitcoin’s value, however, hasn’t been mirrored among companies involved in mining the leading cryptocurrency, with some notable exceptions.

Bitcoin mining firms witness a decline in stock prices

Publicly traded mining firms have witnessed flat or declining stock prices since the start of 2024. For instance, Riot Platforms (RIOT) has experienced a 6.2% decline, while Iris Energy (IREN) has seen a notable drop of 11%. Although mining giants like Bitfarms (BITF) and Marathon Digital (MARA) have seen some appreciation, it’s been relatively modest at 5% and 17%, respectively.

This discrepancy is intriguing given the typically close correlation between Bitcoin’s price and the business operations of miners. Mining companies invest in costly machinery and power to secure a steady stream of new BTC issued by the network. As the industry receives payouts in BTC, their revenue in dollar terms typically rises alongside Bitcoin’s price. Presently, miners earn 6.25 BTC with each block, generated approximately every 10 minutes.

However, looming on the horizon is the Bitcoin halving scheduled for April, which will cut the per-BTC reward to 3.125 BTC per block. Analysts from various firms, including JPMorgan, anticipate that this event could drive smaller, less efficient miners out of the market.

Isaac Holyoak, Chief Communications Officer of CleanSpark, noted a recent pullback in mining stocks, attributing it to the anticipation of the halving. He observed that before this, mining stocks had surged ahead of Bitcoin’s price increase.

Challenges and opportunities ahead of Bitcoin halving

Despite the challenges posed by the impending halving, mining firms have found alternative revenue streams to weather the storm. The popularization of Bitcoin BRC-20 tokens has boosted transaction fees on the Bitcoin network, resulting in higher payouts for miners per block.

Additionally, mining companies are diversifying into other areas, such as AI, leveraging their high-performance computing capabilities. Executives argue that these ventures are more profitable per unit of energy compared to traditional BTC mining.

One standout performer among public Bitcoin miners is CleanSpark (CLSK). Its shares have surged by 64% year-to-date, doubling in value within the past month alone. Over the past 12 months, CLSK has significantly outpaced BTC, boasting a remarkable 603% increase in value.

Holyoak emphasized that Bitcoin ETFs and mining firms offer distinct investment opportunities, catering to investors with varying risk appetites. He suggested that miners prepared for the halving are likely to maintain investor confidence and continue to be rewarded.

While the launch of the Bitcoin ETF has propelled the price of BTC to new heights, mining companies have faced challenges in translating this enthusiasm into stock market gains. The impending Bitcoin halving presents a significant hurdle, potentially reshaping the landscape for miners.