Bitcoin’s Surge Fails to Prop Up Mining Stocks in 2024: A Year of Struggles for Bitcoin Miners

Despite Bitcoin's impressive 113% return in 2024, many publicly traded Bitcoin mining companies are struggling to capitalize on the cryptocurrency's gains, with several mining stocks poised to end the year in the red. As Bitcoin surges, the mining sector faces significant hurdles that have impeded its ability to reflect the digital asset’s strong performance on the stock market.

Mining Stocks: A Mixed Picture Amid Bitcoin's Growth

Bitcoin’s rise to over $98,000 as of December 24 has been a standout success this year, yet many of the 25 publicly listed Bitcoin miners are seeing their stocks suffer. While Bitcoin continues to make headlines for its performance, miners face a tough environment marked by reduced block rewards, rising costs, and increased mining difficulty.

Despite Bitcoin’s gains, only seven out of the 25 miners tracked by the Hashrate Index and Google Finance are reporting positive returns for investors this year. Leading the pack, Bitdeer (BTDR) is up 167%, Cipher (CIFR) has gained 33%, and Hut 8 (HUT) is up by 91%. Core Scientific (CORZQ), which has made a significant comeback, has seen an impressive 327% surge, while Iris Energy (IREN) and Northern Data (NB2) have experienced increases of 72% and 58%, respectively. TeraWulf (WULF), another standout, has risen by 169%.

However, the broader landscape for mining stocks remains bleak. Argo Blockchain (ARB) is down a staggering 84%, Sphere 3D (ANY) has fallen 69%, and Greenidge (GREE) is down by 74%. Other miners, including MARA Holdings (MARA), Hive (HIVE), Bitfarms (BITF), and BitFufu (FUFU), have also struggled, with declines ranging from 12% to 44%.

Miners Grapple with Reduced Rewards and Rising Costs

2024 has been a year of adjustment for Bitcoin miners, who have had to adapt to several challenges. The halving event that occurred in April reduced Bitcoin mining rewards from 6.25 BTC to 3.125 BTC per block. This significant reduction in rewards has hit miners' revenues hard, with overall mining earnings dropping from a peak of over $100 million in April to just $42 million by December 22, according to Blockchain.com data.

In addition to lower rewards, the difficulty of mining Bitcoin has surged. The Bitcoin network’s mining difficulty doubled over the past year, increasing from 72.01 in December 2023 to 108.52 in December 2024. This sharp increase reflects a 50.7% rise in mining difficulty, meaning that miners now require more computational power and energy to successfully mine each new block, raising operational costs significantly.

For some miners, these increased costs have been unsustainable. BitFuFu, for example, reported a 168% surge in Bitcoin mining costs, reaching $51,887 per Bitcoin, despite a 62.5% increase in mining capacity.

Capital Raises and Diversification: A Path to Stability?

To weather the storm, many Bitcoin miners have turned to the capital markets. In the second quarter of 2024, nine out of 13 U.S.-listed mining firms raised approximately $1.25 billion through stock offerings. This trend continued in the third quarter, with an additional $530 million raised, bringing the total for the year to over $2.2 billion.

In an effort to bolster their financial positions, some companies have diversified into new sectors. For example, Core Scientific, traditionally focused on Bitcoin mining, made a strategic move into the artificial intelligence (AI) sector by partnering with CoreWeave to host Nvidia GPUs. This partnership is expected to generate up to $8.7 billion in revenue over the next 12 years, providing Core Scientific with a significant new revenue stream.

Moreover, some companies have begun to hold Bitcoin on their balance sheets, following in the footsteps of other publicly listed firms. MARA Holdings and Hut 8 are the latest to adopt this strategy, seeking to leverage Bitcoin’s value to improve their financial stability.

Conclusion: A Challenging Year for Bitcoin Miners

While Bitcoin’s price surge in 2024 has been remarkable, the majority of Bitcoin miners have struggled to mirror these gains in their stock performance. With reduced mining rewards, higher operational costs, and an increasingly difficult mining environment, the challenges facing Bitcoin mining companies in 2024 are substantial. However, miners are adapting through capital raises and diversification, with some even entering new markets like AI to secure future revenue. As the sector continues to evolve, it remains to be seen whether these strategies will be enough to turn the tide for struggling mining stocks.