coindesk.com
Crypto miners' share prices were up 9.6% between Wednesday and Thursday as bitcoin showed signs of steady recovery, breaking over the $21,000 mark.
Investors were likely uncertain as to how listed miners would react to the bear market, but feel more confident seeing the price of the world's largest cryptocurrency by market cap stabilize, explained Jaran Mellerud, a researcher at Oslo-based Arcane Research.
Digihost (DGHI), TeraWulf (WULF) and Marathon Digital (MARA) led the pack with 26.6%, 18.94% and 17.62% increases respectively from Wednesday's open to Thursday's close. TeraWulf's run came as the company announced on July 5 that it had added $50 million to a $123.5 million loan signed with Wilmington Trust to continue its growth.
"It's possible some people are making the bet" that if bitcoin isn't declining to $18,000, "then this may be an attractive time to start accumulating some of the miners," which are still profitable, said Joseph Vafi, managing director of equities research at investment bank Canaccord Genuity, which covers Argo Blockchain (ARBK), Iris Energy (IREN) and Hut 8 Mining (HUT).
At the same time, many miners "are still growing their exahash [a measurement of computing power on the bitcoin network] pretty nicely this year," Vafi said.
Investment bank D.A. Davidson last week slashed its expectation for computing power growth for the rest of the year to include only "current, funded orders," as per a note from senior research analyst Christopher Brendler. However, that still represents a 37% hashrate increase for last three quarters of 2022 for the five miners that Brendler analyzed: Argo Blockchain, Hut 8 Mining, Core Scientific (CORZ) and Riot Blockchain (RIOT).
At the same time, the difficulty of mining bitcoin has decreased by about 6.7% since May 22 as miners unplugged unprofitable machines, according to data from information platform Blockchain.com. This makes it easier for the miners left standing to mine bitcoin and bring in revenue.
"Many of these stocks are very undervalued compared to their assets and cash flows," Mellerud said. D.A. Davidson said in last week's note that the risk to reward ratio of miners' stocks is better than markets have priced in.
The 15 publicly listed miners CoinDesk analyzed have lost on average 61.37% of their stock value in the past two months. "The stocks are just moving a little bit with bitcoin coming off of a bottom, honestly," Canaccord Genuity's Vafi said, adding that the stock market has also firmed up over the last few days.
Many are facing margin calls on debt as the price of their collateral, mostly bitcoin and mining rigs, has decreased, so they are selling off their bitcoin holdings to continue paying their bills.
Vafi is "not particularly concerned that leverage becomes a large issue" because miners are still profitable so they can keep servicing their loan installments. They can also continue selling bitcoin, he said. One possible negative aspect is that their growth will be constrained if they have trouble raising more capital, he said.
Read more: Crypto Miners Face Margin Calls, Defaults as Debt Comes Due in Bear Market