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In particular, the purpose of this release will be twofold; The first will be to update readers on the latest updates for the public miner hash rate, production, and bitcoin holdings. The second would be to provide a framework for how to approach investing in bitcoin miners, with a particular focus on the public sector.
Public Miners Hash Rate Update
As we near the end of the month, we’ll be releasing another public miner production update for all of May 2022 in a few weeks. With the latest monthly production releases, April 2022 has been another month, despite a slightly lower month of production, where the hash rate has increased and held Bitcoin. The group of public miners we track below accounts for roughly 18% of the total network hashrate, using April numbers of 37.91 EH/s and the most recent drop in total network hashrate to 209.91 EH/s.
Bitcoin holdings among miners have now reached 46,132 bitcoins, worth over $1.3 billion at a price of $29,000. That’s a roughly 7% monthly increase when miners are included with the data reported for both March and April. All this data is before the bitcoin market drops from $40,000, so data updates next month will be key to see if top public miners are reducing bitcoin holdings or hash rates in response.
Hash rate of public mining companies
Hash rate of public mining companies March 2021 – April 2022
Bitcoin holdings of publicly traded mining companies
Monthly bitcoin production by publicly traded mining companies
Investing in Public Bitcoin Miners
Investing in public bitcoin miners carries the operational risk as well as the risks of buying bitcoin due to the fact that public stocks trade at multiples of expected future earnings. In environments where Treasury yields increase significantly, this causes earnings multiples to fall, so stocks as a whole underperformed through 2022.
However, the dynamics regarding the evaluation of public bitcoin miners are somewhat different. Unlike other “commodity” producers, bitcoin miners generally try to keep as many bitcoins as possible on their balance sheet. Accordingly, the future supply issue of Bitcoin is known in the future with near 100% certainty.
With this information, if an investor values these stocks in bitcoin, a significant performance against bitcoin can be achieved if investors allocate them at the right time during the market cycle using a data-driven approach.
When is the Best Time to Invest in Public Bitcoin Miners?
An extremely simple framework for investors:
Hash price bull market = Bitcoin miners outperform bitcoin
Hash price bear market = Bitcoin miners underperform bitcoin
Hash price divides miner revenue by hash rate (daily miner revenue per 1 TH/s, first time by team Luxor).
While there are certainly other variables in valuing these companies, including operational risks and the management team’s ability to count just a couple, this is a simple framework for investors to internalize and use going forward.
To begin, let’s view the hash rate since the start of 2020, from which the hash price is partially derived.
Average bitcoin hash rate
Below is the hash price (daily miner revenue per TH/s) in both USD and BTC.
Hash price in USD and BTC
Currently the hash price is $0.118, which is above the 2020 low of $0.074, but the hash rate (and subsequent miner difficulty) is falling rapidly as the price continues to drop/consolidate.
Let’s take a look at the latest hash price bull and bear cycles and how public miners are performing in bitcoin instead of dollars (because that should be the whole point of investing in a mining operation).
Below is the hash price from the low of 2020 to the high of 2021 and the performance of several public miners ($MARA, $RIOT, $HUT) compared to bitcoin. During the hash price bull market (where the price increased faster than the hash rate), these three names outpaced bitcoin by 318%, 207%, and 62%, respectively.
Bitcoin hash price and bitcoin-priced public mining shares
After the highest hash price to date in October at $0.4222, where the hash price was $0.1182, these same names returned the following against bitcoin:
- $RIOT: -55.67 %
- $HUT: -59.21%
- MARA $: -62.12%
Public mining company shares priced with hash price and bitcoin
While Bitcoin has clearly fallen significantly since its highs in the fall of 2021 (a 57% drop), most of these publicly traded miners have lost significantly more, down over 70%.
Public miner shares percent off from all-time high
Bitcoin public miner market cap
Bitcoin public miner shares are priced in bitcoin
The purpose of this article is to examine the cyclicality of the mining industry and how to consider these securities as they navigate the bitcoin market cycle.
Another important fact of the Bitcoin market is that the hash rate has continued to increase exponentially throughout its history, which means that the hash price has been in a secular downward trend on both USD and BTC basis.
Going back to a point made before, the whole point of investing in a mining operation should be to get a return on investment in bitcoin. If you don’t get a positive ROI for BTC, it’s probably not a good investment in the first place.
Therefore, due to the decreasing block reward and increasing hash rate, the hash price in BTC is programmatically dropping incrementally with each subsequent positive difficulty adjustment and halving event.
Bitcoin hash price
In simple terms, this means that it is becoming more and more difficult to generate a marginal unit of bitcoin with one unit hash; so this may well be nailing the timing for public miners as well as ASIC rigs to invest in them. lucrative.
Closing Note
While nothing is certain, by using a data-driven approach it is possible to achieve a significant return on investment for bitcoin with bitcoin miners in both the public and private sectors.
While achieving favorable relative performance levels requires a fair share of analysis (and luck) regarding both the bitcoin hash rate, bitcoin price action and the ever-increasing macroeconomic backdrop, we expect an opportunity to outperform once again for mining investors. the not-too-distant future.
That day may not be today, but our mission is to provide transparent analysis of the bitcoin ecosystem to help individuals and institutions make informed decisions about their savings/investments.
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– Bitcoin Magazine Professional Team
