Which asset performed the best in Q1 2023?
Compared to figures recorded at the beginning of the year, the international gold price has risen by 11.2%, the S&P 500 index has seen a growth of 6.21%, and the No.1 crypto Bitcoin has surged 70.36%, breaking through the $28,000 mark.
To date, Bitcoin outperformed major commodities such as the S&P 500 and gold, making itself the best-performing asset so far this year and a major safe haven for investors to avoid risks of bank insolvency. The soaring price of Bitcoin is not only a cause for celebration in the investor community but also good news for miners. According to TheBlock, mining revenue has seen a growth of over 66% in the past three months, totaling $1.982 billion.
Mining firms finally see a silver lining, as hash price rebounds
In 2022, crypto mining companies had to struggle with the rising mining difficulty and surging electricity costs. Of the mining firms, Core Scientific, one of the world’s largest crypto mining companies listed in the United States, filed for bankruptcy.
However, the Bitcoin hash price has gradually rebounded. Data from HashrateIndex shows that the hash price index has grown 40% in the past three months, soaring from the low point of $0.06034 per terahash to $0.08487 at the peak. In particular, Bitcoin ASIC miners, which offer the highest energy efficiency (38J/TH), are currently priced at $16.2 per terahash.
When it comes to listed crypto mining companies, the most straightforward performance indicator is their stock prices. Since 2023 kicked off, multiple listed mining companies, including Marathon, CleanSpark, Hut8, and Argo, have seen a rebound in stock prices, with the highest growth record at 130.3%. Aside from that, following the industry’s efforts to deleverage in the first quarter, the liquidity issues of most mining companies have eased.
Changes in the stock price of major mining companies in North America (Q1 2023)
Falling electricity prices present opportunities for miners to profit
In 2022, Europe suffered a shortage of natural gas supply due to geopolitical conflicts, which, coupled with multiple heatwaves during the summer, sent gas and electricity prices soaring to historical highs. This surge in the electricity price also spread to North America: in most states, the average industrial electricity price grew more than 10% year on year.
In particular, Georgia, the most popular destination for BTC mining in North America, saw the largest price increase, with the average industrial electricity price skyrocketing from $65/MWh to $93/MWh, a whopping 43% increase from 2021 to 2022. The expensive cost of electricity also became the last straw for some mining companies. In short, the gross imbalance between natural gas supply and demand was the main reason behind the global energy crisis and the consequent electricity price growth in 2022.
That being said, wholesale U.S. power prices are broadly expected to drop in 2023 as the cost of natural gas falls and cheap renewable electricity expands. Texas’ industry could see power prices fall by as much as 45% to $42.95/MWh, according to the Energy Information Administration (EIA). It should be noted that Texas is home to nearly 11.22% of the total Bitcoin hashrate in the United States.
Overall, wholesale U.S. power prices will decline by 10% to 15% this year, as estimated by researcher Rystad Energy. For miners, the long-awaited drop in electricity prices is finally on the horizon. Furthermore, the low power prices may improve the mining revenue.
Note: In March, miners earned $718 million, the highest monthly revenue since May 2022.
A crypto spring may soon arrive
In March, on the macro level, the collapse of Silicon Valley Bank triggered a crisis in the U.S. banking industry, which highlights decentralized cryptos like Bitcoin that could be used for hedging, and such cryptos may attract more attention from traditional investors.
By April, Elon Musk changed Twitter’s logo to a Dogecoin emoji, sparking FOMO sentiment in the crypto community once again. Meanwhile, the crypto market is also embracing bullish events (e.g., Ethereum’s Shanghai upgrade), which are expected to drive up crypto prices.
Disclaimer: This article offers no financial advice.