Crypto Mining Stocks Eye Best Month in a Year Atop Bitcoin Jump

A Bitcoin rebound has put crypto mining stocks on course for their best monthly performance in at least a year, providing some respite from the debt and energy-price worries that pummeled the shares in 2022.

Bitcoin fluctuated between gains and losses on Tuesday after advancing for 13 straight days through Jan. 16. (AFP)

A Bitcoin rebound has put crypto mining stocks on course for their best monthly performance in at least a year, providing some respite from the debt and energy-price worries that pummeled the shares in 2022.

The 20-member MVIS Global Digital Assets Mining Index is up 64% so far in January, outstripping Bitcoin's 28% advance. That's the gauge's best month since its inception at the end of 2021 and contrasts with last year's 88% drop.

The Luxor Hashprice Index — which seeks to measure how much a miner can expect to earn from the computing power used for the Bitcoin network — is up 21% this year. That partly reflects bigger rewards from a higher Bitcoin price.

Quite how long the surge in mining stocks can last is a topic of debate. Bitcoin remains some 70% below a high of almost $69,000 hit in 2021. Cash-strapped miners are reducing loans after gorging on debt-financing to expand during the boom and then hitting the buffers amid last year's digital-asset rout.

Core Scientific Inc., the largest Bitcoin miner by computing power, declared bankruptcy in December. Some like Riot Platforms Inc. and Bitfarms Ltd. started selling coin reserves last year to boost liquidity.

“It appears more attractive to start a new Bitcoin mining venture than to try to pick the bottom in many of these listed stocks right now,” said Matthew Sigel, head of digital-asset research at fund manager VanEck.

Sigel cited the “substantial” debt levels at many existing miners, and the sharp slide in the price of Bitcoin mining rigs, as justification for his position.

For now, Bitfarms is sitting on a more than 140% jump in January, while Marathon Digital Holdings Inc. has climbed over 120%. Hive Blockchain Technologies Ltd. has also more than doubled in the period.

Riskier investments like crypto have rallied this year on bets that debilitating interest-rates hikes are coming to an end as inflation cools. Any shift in that prevailing market narrative could see some of those gains quickly reverse.

Bitcoin fluctuated between gains and losses on Tuesday after advancing for 13 straight days through Jan. 16, a winning streak rare for its length. The world's largest token by market value was trading at about $21,200 as of 1:30 p.m. in Tokyo.