Believe it or not, in 2021, Bitcoin mining stocks outperformed the king of cryptocurrencies. This crowns the phenomenal year the whole Bitcoin industry has had. However, consider Arcane Research’s warning, “an investment in mining companies carries a much higher risk than an investment in bitcoin itself.” As with any other complex business venture, a lot can go wrong with a Bitcoin mining operation.
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The graph shows both the mining index and Marathon outperformed Bitcoin. The “15 biggest publicly listed mining companies” compose the index. It grew “197% in 2021, against Bitcoin’s 100%.” Let’s analyze both Marathon and the Chinese company Bit Digital cases since they show how differently these mining companies can perform.
Performance of mining stock Vs. Bitcoin | Source: Arcane Research
Marathon Had An Amazing 2021
As the graph shows, Marathon’s growth was monumental. Arcane Research’s The Weekly Update elaborates and explains:
“Marathon is the best performer of 2021 seeing a 391% gain. Marathon doesn’t own data centers but rents hosting space – meaning most of their assets are machines. The value of machines is much more volatile than the value of data centers, leading Marathon’s stock price to be more volatile than that of the vertically integrated mining companies that owns their own data centers.”
This year, the worldwide chip shortage made ASICs more valuable. A company like Marathon was positioned to take advantage of that, and they did. In related news, the company recently put Bitcoin on its balance sheet. Plus, its “mining pool, MaraPool, has adopted and implemented Bitcoin Core version 0.21.1.” which supports Taproot. In a press release, Marathon announced:
“Marathon will adopt the update without modification. As a result, Marathon’s mining pool, MaraPool, will no longer filter transactions. Once the update is complete, the pool will begin validating transactions in a manner consistent with all other miners who use the standard node.
“Marathon is committed to the core tenets of the Bitcoin community, including decentralization, inclusion, and no censorship,” said Fred Thiel, Marathon’s CEO.”
That’s right, no more “OFAC compliant” blocks from the giant mining company.
BTC price chart for 12/01/2021 on Bitstamp | Source: BTC/USD on TradingView.com
Bit Digital’s 2021 Was Full Of Obstacles
On the other side of the spectrum, we have the Chinese giant Bit Digital. This is their story:
“Bit Digital has had a very rough year, with its share price declining 56%. The company has spent most of 2021 relocating its operations from China to North America. Their poor performance in 2021 is a reminder that moving a mining operation is extremely costly.”
It’s also a reminder that Bitcoin mining is so good of a business that relocating from China is worth the effort. Bit Digital will probably thrive in 2022. As will the Bitcoin network. In related news, it’s been just five months since China banned Bitcoin mining and the network’s hashrate almost made a full recovery. A recent Kraken Intelligence report gives us the numbers and the hard data:
“As of the time of publication, the 7-day moving average of hashrate has climbed nearly +98% to 166.1 EH/s after falling to a near 2-year low of 84.1 EH/s on July 3rd. In other words, Bitcoin’s current hash power must rise another +8.9% to revisit all-time highs of 180.8 EH/s last seen in May 2021. On-chain data shows that computational power deployed to the network is likely to continue heading higher and might hit a new all-time high in early December.”
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That’s right, the Bitcoin network is only 9% away from a new hashrate all-time high. Bitcoin keeps on trucking supported by the miners. Who, as the graphic shows, had a phenomenal 2021.
Feature Image: hangela on Pixabay | Charts by TradingView