Reduced to Penny Stocks in 2022, Public Bitcoin Miners Are Ready to Return

After a historically bad year for bitcoin mining, public companies that fell into penny stock status surged in January following a strong rally in bitcoin.

2022 was arguably the worst year ever for bitcoin mining. All markets suffered from the consequences of the unprecedented recklessness of central banks around the world. But because bitcoin is nothing if not volatile – and because mining acts as a leveraged bet on bitcoin itself – the mining sector of the bitcoin economy ended last year beaten. and bruised. In fact, many public mining companies have been relegated to trading as literal penny stocks.

However, thanks to an unexpected and extremely bullish start to the year, investors have seen Bitcoin mining stocks come back to life. No doubt the relief in stock prices (and the price of bitcoin itself) is welcome. How long this rally will last, however, is an open question.

This article summarizes the state of bitcoin mining at the start of this new year, the tragedies left behind in the previous year, and the opportunities ahead.

New Year’s Mining Rally

2023 has started with a bang for publicly traded bitcoin mining companies.

Year-to-date, companies like Riot Platforms, Marathon Digital, and CleanSpark have all gained between 40% and 110%, according to market data from TradingView. These surges in stock prices are largely due to a sustained rise in the price of bitcoin. Since New Year’s Day, the leading cryptocurrency has gained over 44%. As a result, the mining economy is also improving. Hash price jumped 25% even as the hash rate (which when rising normally drives hash price down) hit new all-time highs in January.

Overall, however, bitcoin miners ended 2022 on a very bearish note. As noted above, many of them traded like literal penny stocks during the holidays.

An Overview of Penny Stocks

Penny stocks intuitively suggest securities that trade at the market price of pennies. And, in fact, many bitcoin mining companies have seen stock prices drop to pennies. But officially, the definition of penny stocks refers to shares of a small company that trade for less than $5 per share. Penny shares can be traded on major exchanges like the Nasdaq, which has listed many bitcoin mining companies. But most of them trade via over-the-counter (OTC) transactions.

However, several bitcoin mining companies would have been lucky enough to see the stock price above $5 at the end of last year. The data in the following sections shows that after reaching multi-billion dollar market capitalizations, not just a few, but many mining companies had stocks trading below a single dollar.

Bitcoin Mining Penny Stocks Data

Bitcoin has fallen around 65% in 2022. While this isn’t the worst bear market pullback ever for bitcoin itself, miners weren’t so lucky. The line chart below shows the actual stock prices of a select group of leading mining companies for the duration of 2022. Even a cursory glance at the visual will recognize a common theme: down…a lot.

The worst came last for these poor companies. At the very end of 2022, nearly a dozen companies saw their share price drop below the dollar. The following list is made up of bitcoin mining companies that were trading below $1 at the end of last year.

• Basic Scientist: $0.20
• Hut 8: $0.87
• TeraWulf: $0.58
• Mawson: $0.28
• Digihost: $0.47
• Mining BIT: $0.20
• Argo: $0.44
• Figure: $0.62
• Digital bit: $0.56
• Greenidge: $0.37
• Fortress: $0.46

After reviewing all of the data above, you might be wondering: does the stock price of bitcoin mining even matter? Obviously not for the long-term success of Bitcoin. But the public mining sector reflects on Bitcoin itself to a significant degree. The mess of bull market risk taking, greed and general excess is not pleasant. Let’s hope the worst is over.

The route of the pink slides

How did the once booming bitcoin public mining sector fall to penny stock status?

After reaching a total market value of over $100 billion, bitcoin mining companies collapsed. This effect is somewhat unavoidable when bitcoin itself crashes. Mining is expensive, capital intensive and highly competitive. When market conditions are anything but perfect, heads begin to roll metaphorically.

Additionally, it should be noted that the macroeconomic headwinds facing every market have effectively killed every tech market in the world. Bitcoin mining had no chance of escaping the bloodshed. Meta, for example, was the worst performer in the Standard and Poor’s 500 index last year. Apple, which dominates the weighting of the same S&P 500 index at around 6%, also ended last year down sharply.

But, beyond the macroeconomic landscape, bitcoin miners are not immune to greed and reckless business decisions. A significant part of the growth in the public mining hash rate and mining company valuations was directly related to over-leveraged investors and operators making risky bets in the same style as other “crypto” companies, which have now made bankruptcy. Miners that become penny stocks or file for bankruptcy are the result of the same quality of choice.

New year, old miners

Many new mining teams that have entered the market in recent years have not reached 2023. But every miner who survived the past year is now a hardened veteran. Is the bear market over? Nobody knows. But in the face of bankruptcies, lawsuits, executive departures, debarments and more, miners who are still chopping today can probably keep chopping through anything.

Hopefully the lessons of greed and degeneration from the last bull market won’t be quickly forgotten, but this author won’t be holding his breath.

This is a guest post by Zack Voell. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.