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While Bitcoin has almost doubled in value since the beginning of the year, one of its close counterparts in the investment landscape has proven to be a more lucrative option: mining companies.
Almost all publicly listed Bitcoin mining firms have increased by over 100% since January 1, benefiting from both the rising value of BTC and favorable business developments.
Bitcoin Miners VS BTC
Shares of Marathon Digital (MARA), one of the largest public miners by hashrate, have risen 158% year to date.
In contrast, competitors such as the renewable energy-focused Iris Energy (IREN) and Riot Platforms (RIOT) have experienced increases of 168% and 186% respectively.
Mining companies generate revenue by operating powerful and costly computer systems to mine the next block of Bitcoin, to which a fixed amount of new BTC is linked. Consequently, as Bitcoin’s value increases, so does the dollar value of their rewards, and thus their profits.
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So far, Bitcoin has risen 90% in 2023, largely driven by a series of U.S. bank failures in March that undermined confidence in the traditional financial system.
It has also surged on the anticipation that a spot Bitcoin ETF may finally gain approval before the year concludes, particularly in light of applications from BlackRock and recent court victories in the crypto sector.
On Monday alone, Bitcoin climbed 5.6% to $31,600 as the Court of Appeals officially instructed the SEC to reassess Grayscale (GBTC)’s Bitcoin ETF application. Similar to mining firms, GBTC shares have also outperformed Bitcoin this year, increasing by 201%.
Miners Preparing For Halving
In general, Bitcoin-adjacent companies exhibit a higher beta than BTC itself, indicating they are more prone to greater volatility in both directions. Coinbase (COIN), for instance, the only publicly traded crypto exchange, has risen 129% this year.
However, the mining sector has made significant advancements this year to enhance its value proposition to investors. For example, companies like CleanSpark (CLSK) – which is up 111% – have announced several major investments in the latest Bitcoin mining technology this year, increasing their capacity to acquire new BTC.
Such investments from CleanSpark and others have contributed to driving Bitcoin’s total hashrate to numerous new highs this year, while also reducing the cost of older mining hardware that has become less efficient over time.
Miners are also diversifying: many companies, including Iris, HIVE, Applied Digital, and others, have expanded beyond Bitcoin mining into cloud computing and HPC services utilizing their existing infrastructure. Several firms have asserted that these services are significantly more profitable per unit of energy than Bitcoin mining.
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