Bitcoin mining stocks underwhelm in March, but brighter days may be around the corner

Bitcoin mining stocks had a dull performance in March, with small movements here and there following BTC’s price movement. While it is encouraging to see that most stocks held on to their impressive January gains, Bitcoin’s price action will be critical to the short- to medium-term performance of these stocks.

In addition, the expansion of the public Bitcoin mining sector in the US continues as US miners reported one of the largest ASIC imports in January 2023. The delivery of new machines and an increase in the BTC price led to an increase in the network’s hashrate to new all- hour highs. However, the miners’ income is dampened by the increasing network difficulty.

Mining stocks are in wait-and-see mode

Despite Bitcoin’s recent 18% rally, the muted performance of most mining stocks can be attributed to the uncertainty surrounding the sustainability of Bitcoin’s price rally and the increasing competition in the mining industry. The hashrate index, a proxy for Bitcoin mining stocks, rose 10% in March from 1,929 to 2,141 points.

The median monthly gain in the top ten mining stocks is 0.30%, with an average of 5.21%. Riot Platforms and Cipher Mining led the monthly gains across the sector with increases of 28.64% and 24.34%. CleanSpark, Inc. and Bitfarms Ltd. performed worst, with negative movements of 6.52% and 5.79%.

The average gain in Q1 2023 across the top ten Bitcoin mining stocks is 128%. These stocks produced most of the gains for the first quarter of 2023 in January. The following months, February and March, saw a muted performance from most mining company stocks.

The chart of Marathon Digital’s shares perfectly illustrates the price action of the industry, with a high candle in January, followed by small movements over the next couple of months.

Currently, mining companies are focused on expanding and maintaining operations rather than profit. Marathon Digital increased mining capacity by 30% in February. The firm’s aggressive expansion will increase production capacity from 9.5 EH/s to 23 EH/s by mid-2023.

At the same time, Canadian mining company Hut 8 Mining Corporations announced a merger with US-based Bitcoin Corp to combine their resources and cope with the downturn in the industry.

The network’s hashrate rose as new ASICs flooded the market

The Bitcoin network’s hash rate increased to an all-time high of 348 exahash per second (EH/s) from 320 EH/s in the last week of March.

Miner earnings jumped around 30% following the recent increase in BTC price, rising from $65 per petahash per sec (PH/s) per day in Q4 2022 to around $85 per PH/s per day in Q1 2023. But Bitcoin’s price jumped over 60% in the same period.

The rise in Bitcoin’s price is only part of the reason behind the hashrate rise. The discrepancy in miner income can be attributed to the increasing mining difficulty. It was mainly due to the delivery of new machines across America, which increased the processing power and difficulty of the network.

In January 2023, American miners reportedly imported 1,555 tons of machines, which has driven the network’s hashrate to its current peak.

Related: Crypto Mining in 2023 — Is It Still Worth It? See Market Talks

The increase in the network’s hashrate has limited the earnings of miners, which could negatively affect miners’ earnings should BTC prices fall from here.

There is a likelihood that the network’s hash rate could plateau around current levels. The MinerMag report added:

“If there is no large increase in shipment gross weight for the rest of March and into April, the growth rate of bitcoin’s network hashrate may gradually slow down.”

Bitcoin’s price performance will continue to play a significant role in the growth of the mining sector, but the BTC price must maintain its current level or move higher for positive earnings and a continued rise in public stocks.

The views, thoughts and opinions expressed herein are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.