Public mining companies enter the final quarter of 2022 battered and bruised after nine months of bear market brutality. At the end of the third quarter, the total market values of all U.S.-listed mining companies fell more than $14 billion since the beginning of the year, according to data compiled by YCharts. Whether the end of the year will offer a respite for these companies is very much an open question, as the headwinds of macroeconomic tumult seem unabated in the face of historic inflation and central bankers desperate for quick financial fixes. This article reviews the downward trend in the share prices of public mining companies as the final quarter of the year begins.
2022 Mining Market Recap
More than half of the total $14 billion wiped from the market values of public mining companies is attributed to just five companies, according to data from YCharts: Core Scientific, Marathon, Riot, TeraWulf and Hut 8. The bar chart below visualizes each company’s change in total market capitalization from the start of the first quarter to the end of the third quarter this year.
Compared to bitcoin itself, the losses suffered by public mining companies are small. Since Jan. 1, bitcoin’s total market value has fallen from $900 billion to less than $400 billion at the end of September, according to data from TradingView.
Readers should be aware that these charts only show public mining companies listed on the US markets, namely the Nasdaq, one of the most liquid and actively traded markets in the world. But other relatively prominent public companies in non-US markets have also suffered significant losses, including Northern Data and Cathedra.
Any future price issues for mining companies are entirely dependent on the price of bitcoin. Mining stocks are still closely related to the price of bitcoin, as noted by this author in a previous article for Bitcoin Magazine, and continue to underperform. The line chart below visualizes the share prices of all the mining companies included in the bar chart above with a price in bitcoins since the beginning of the year.
Bullish Hope Springs Eternal
Despite already being one of them longer and the toughest bear markets in bitcoin history, especially for miners, as the difficulty continues to rise to new heights while the price continues to fall, there is still hope for the long-term public mining sector.
On the one hand, as long as Bitcoin is bullish, bitcoin mining companies will also have a bright future despite intermittent periods of bearish market conditions. Even if some mining companies fail, others will take their place.
On the other hand, even mainstream financial analysts see potential in the mining sector, with some analysts calling for a “significant lead” among public miners, according to CoinDesk, and others praising the “fantastic” fundamentals of ‘some miners. And those fundamentals, for many companies, continue to improve. In September alone, for example, CleanSpark acquired a 36-megawatt site in Georgia, Aspen Creek raised $8 million to expand its solar mining, Rhodium plans to go public, and mining veteran Jihan Wu created a $250 million fund for distressed mining assets. The mining sector is far from dead.
Opportunity from immaturity
In many ways, the last two years represented the first market cycle for a significant portion of the mining market, and nothing goes well during the first time a market goes through the ups and downs. Losses will be incurred, valuations will plummet, and some companies will collapse completely.
But winners always emerge from periods of market immaturity. And the immaturity of the public mining market is easy to see. For example, the price of all mining stocks continues to move almost in step with bitcoin, even though each company has huge differences in operating strategies, outstanding debts, number of machines online and more. This shows that the market cares more about the price of bitcoin than the fundamentals of the company. But this immaturity also means that there is a huge upside for growth and maturation. If that’s not reason enough to get you bullish on mining, nothing will be.
This is a guest post by Zack Voell. The opinions expressed are entirely my own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.