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Thursday, December 1, 2022

Bitcoin mining stocks rebound sharply despite a 70% drop in BTC miners’ revenue

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Bitcoin (BTC) mining firms have suffered in 2022 because of the crypto bear market. Nonetheless, their stocks collectively noticed a sharp rebound on July 6, elevating hopes that buyers have began to purchase the dips.

One of the intraday winners was Bitfarms (TSE: BITF), which surged by over 24% to shut at $1.29.

Similarly, Marathon Digital Asset Holdings (NASDAQ: MARA), Core Scientific (NASDAQ: CORZ), and Cathedra Bitcoin (CVE: CBIT) rose by over/round 12.5%, 16.22%, and 15%, respectively.

MARA, CORZ, BITF, and CBIT day by day value chart. Source: TradingView

Bitcoin miners’ revenue down 70% from peak

The rallies come as a breather in what has been a unhealthy yr for mining stocks. An almost 60% year-to-date plunge in the BTC price and a rise in “mining difficulty” have pushed the miners’ daily revenues lower by over 70% from their November 2021 peak of $62 million.

Bitcoin daily miner revenue versus difficulty. Source: CoinMetrics/Arcane Research

The outcome is bad for all the mining stocks, including the ones mentioned above. For instance, BITF is still down 86% from its peak in pre-market trading on July 6 despite a 24% rebound in the previous session.

Similarly, MARA, CORZ, and CBIT have been trading 80%–93% below their record highs in November 2021, showing a far deeper drawdown than Bitcoin, whose price has dropped 67% in the same timeframe.

Mining stocks vs. BTC/USD (blue) daily price chart. Source: TradingView

“Short covering” to trap bulls? 

Bitcoin mining stocks risk further downside, however, given a potentially lengthy bear market led by macro dangers.

Thus, the sharp rebound witnessed throughout the Bitcoin mining stocks could possibly be resulting from “brief overlaying” or buyers shopping for the dip, in accordance with Balmy Investor, a pseudonymous analyst.

Covering shorts entails shopping for again the borrowed underlying asset to shut a brief place at a revenue or loss. That sometimes results in frequent rebound strikes, particularly throughout a bear market, the place bulls are vulnerable to being trapped.

Related: Core Scientific sold $167M worth of Bitcoin holdings in June

For occasion, the MARA inventory chart under exhibits a number of instances of short-lived upside runs throughout an total bearish cycle.

MARA/USD day by day value chart. Source: TradingView

Meanwhile, “oversold” bounces are sometimes triggered when an asset’s relative energy index (RSI) slips under 30, which many conventional technical analysts think about a purchase sign.

The RSI readings of Marathon Digital Asset Holdings, Core Scientific, Cathedra Bitcoin, and Bitfarms had been under 30 as of July 6.

The views and opinions expressed listed here are solely these of the writer and don’t essentially replicate the views of Cointelegraph.com. Every funding and buying and selling transfer entails danger, it is best to conduct your individual analysis when making a resolution.