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

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

Additionally, the expansion of the public Bitcoin mining sector in the U.S. continues as American miners reported one of the biggest ASIC imports in January 2023. The delivery of new machines and an increase in the BTC price led to a surge in the network’s hashrate to new all-time highs. Miners’ incomes, however, are subdued by the rising network difficulty.

Mining stocks are in wait-and-see mode

Despite Bitcoin’s recent 18% rally, subdued performances of most mining stocks can be attributed to the uncertainty around the sustainability of Bitcoin’s price rally and the increasing competition in the mining industry. The Hashrate Index, a proxy for Bitcoin mining stocks, increased 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 a 28.64% and 24.34% rise. CleanSpark, Inc. and Bitfarms Ltd. were the worst performers, with negative 6.52% and 5.79% moves.

The performance of the top ten Bitcoin mining stocks as of March 28.

The average Q1 2023 gains across the top ten Bitcoin mining stocks is 128%. These shares yielded the majority of their Q1 2023 gains in January. The following months, February and March, saw a muted performance from most mining company stocks.

The chart of Marathon Digital’s stock perfectly illustrates the price action across the industry, with a tall candle in January, followed by small moves in the next couple of months.

MARA/USD monthly price chart. Source: TradingView

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

At the same time, Canadian mining firm Hut 8 Mining Corporations announced a merger with the U.S.-based Bitcoin Corp to combine their resources and weather the downturn across the industry.

The network’s hashrate soared as new ASICs flood the market

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

The revenue of miners jumped around 30% after the recent rise in BTC price, increasing from $65 per petahash per sec (PH/s) per day in Q4 2022 to around $85 per PH/s per day in Q1 2023. However, Bitcoin’s price jumped over 60% during the same period.

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

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

Related: Crypto mining in 2023 — Is it still worth it? Watch Market Talks

Bitcoin monthly estimate of miner shipments and the network’s hashrate. Source: TheMinerMag

The rise in the network’s hashrate has limited the revenue of miners, which may adversely affect miners’ incomes if BTC prices were to fall from here.

There’s a probability that the network’s hashrate could plateau around current levels. The MinerMag report added:

“If there’s no major uptick in the shipment gross weight in 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 BTC price must sustain its current level or move higher for positive revenues and a continued uptrend in public stocks.