During this time, other mining stocks, like Marathon Digital Holdings in the chart below, exhibited a weak correlation with Bitcoin’s price, suggesting that December’s downturn was probably overblown.The negative trend reversed at the start of 2023 as most mining stocks posted impressive gains. The Hashrate Index mining stock index, which
Riot Blockchain, Bitfarms Ltd, Hive Blockchain Technologies, Cleanspark Inc, Marathon Digital Holdings and Hut 8 Mining are the largest publicly traded Bitcoin mining companies with over 1% of the global hashrate share. The top 15 public mining companies have a combined share of around 19%.Notably, the PE ratio of most companies in the industry is between 0 and 2, except for Marathon, Hive and Hut 8. This raises alarms that these companies could be overvalued at their current valuations.
By the end of October 2022, Marathon took $100 million in loans, which risks getting liquidated if Bitcoin’s price falls below the loan threshold value. For instance, if the loan threshold is 150%, the company will be forced to sell some of its BTC to clear the loans if Bitcoin price drops below $15,000.In this regard, it is encouraging to see that Hive, Hut8 and Riot are mostly debt-free and functioning essentially on equity capital.
While mining companies are struggling with profitability, they are determined to conserve their Bitcoin treasury levels. Despite suffering losses since Q2 2022, Marathon was able to retain its treasury holding levels.At the same time, Hut 8 mining uses a more aggressive policy in selling its mined BTC. This has led to a strong increase in its holdings since mid-2022.Whereas, others like Riot and Hive have resorted to using their BTC treasury to cover operational and expansion costs.
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