Prizmabet

Disclosure: The author of this story owns shares of the following bitcoin miners: IREN (IREN), MARA Holdings (MARA), Cipher Mining (CIFR), Bitfarms (BITF), Riot Platforms (RIOT) and CleanSpark (CLSK).

Bitcoin (BTC) miners are facing the strangest sort of existential threat in this era of scant profits: They can pivot to powering artificial intelligence (AI) or high-performance computing (HPC) and watch their stocks soar, or they can stick around and dominate their original turf, but see a languishing stock price.

That was the tale of mining in September, anyway, in terms of equity returns.

Miners with the largest market capitalizations – MARA Holdings (MARA), Riot Platforms (RIOT) and CleanSpark (CLSK) – all increased their share of the total amount of bitcoin mined last month versus August. These companies have much stronger balance sheets and larger mining operations, which is helping them navigate the reduction in mining profitability spurred by the bitcoin halving in April.

However, investors aren’t paying a premium for their stocks, as they continued to underperform in September. Meanwhile, miners putting focus on AI and HPC computing, such as Core Scientific (CORZ), TerraWulf (WULF) and IREN (IREN), beat bitcoin in September.

The shift in investor sentiment isn’t surprising, as the halving in April – which cut by 50% the reward for mining BTC – has made mining more competitive with narrower profit margins. Adding to the negative sentiment, the recent approval of spot bitcoin exchange-traded funds (ETFs) in the U.S. has reduced investors’ appetite for mining stocks.

Instead, investors are rewarding miners that now use part of their data centers to host AI- and HPC-related machines to diversify their revenue. AI and HPC computing require a large amount of power, which bitcoin miners have already secured, making them an attractive resource for AI and HPC companies that want to quickly ramp up their businesses.

In fact, looking at the share prices of publicly traded miners in September, stocks of miners with larger market caps rose between 4% and 9%. Miners with links to AI and HPC saw gains as large as 25% for the month. Bitcoin’s price rose about 7%, while the CoinDesk 20, a broad crypto market benchmark, climbed about 12%.

Miners are already surging in October, too, despite bitcoin trading relatively flat. Riot is up 12% and Cipher Mining (CIFR) is up 8%. October is also historically one of the strongest months for bitcoin, earning it the nickname “Uptober.”

September’s takeaway

Mining economics are tough after the halving.

The hashrate of the Bitcoin network, on a seven-day moving average, rose to an all-time high of 693 exahashes per second, or EH/s, while maintaining an average hash rate of 630 EH/s. Hashrate, a proxy for how competitive mining is, measures how much computing power is online on the network.

September also saw bitcoin difficulty – a measure of how hard it is to mine a new block in the network – hit an all-time high. Bitcoin’s difficulty is a measure of how hard it is to mine a new block in the network, which adjusts every 2,016 blocks based on the computational power, ensuring the blocks are consistently mined every 10 minutes. Meanwhile, the hashprice, a measure of miners’ profitability, hit a one-month high at $48.0 PH/s, according to Glassnode, despite remaining near all-time lows.

Drilling down into the individual miners’ monthly data, it seems MARA – the largest publicly traded miner with a market cap of $4.8 billion, and the company formerly known as Marathon Digital – had a successful September, increasing their energized hash rate by 5% in September to 36.9 EH/s. MARA also mined 705 BTC, a 5% increase from the previous month and the most mined in a single month since the halving in April. The firm also increased its BTC holdings to 26,842, the second-largest bitcoin stockpile among publicly traded companies, trailing only MicroStrategy. At the same time, it remained on track to reach 50 EH/s by the end of 2024.

The third-largest miner by market cap, Riot Platforms, also increased its mined bitcoin by 28% during September, as the company increased computing power across its facilities. Riot estimates to hit a hashrate of 36.3 EH/s in the fourth quarter of 2024 and 56.6 EH/s by the second half of 2025. Riot currently holds 10,427 BTC in its balance sheet.

Hurricane Helene, selling BTC for land

A divergence between bitcoin (BTC) price and its hashrate or network’s total computing power could potentially point towards a rally in the price of the largest digital asset.

Historically, these divergences have occurred only a few times in the past three years. In some cases, bitcoin prices have reached a local bottom during these events, followed by a rally as the market catches up with the rising hash rate. Bitcoin network’s hashrates rise and fall depending on how many miners have their mining computers online to validate transactions.

Consistent with this pattern, bitcoin has already shown signs of recovery, gaining about $9,000 since the local bottom on Sept. 6, representing a 15% increase in value. This divergence between bitcoin’s (BTC) price and its hash rate started to shape up in July and then persisted into early September, when the computing power of the network reached an all-time high of 693 exahashes per second (EH/s) on a seven-day moving average, while bitcoin’s price was near $54,000.

A significant factor contributing to the recent surge in hash rate is the activity of publicly traded mining companies. Before the halving – where bitcoin rewards get cut in half – the hash rate peaked at 650 EH/s and dropped to 550 EH/s in June, as less efficient miners exited the network due to higher competition. It has now returned to pre-halving levels as publicly traded miners that are well-capitalized, have increased their market share by raising their computing power.

In fact, data from the sixteen public companies show that they have almost reached a 23% market share in production, the highest since at least January 2023, according to the industry journal TheMinerMag. It is likely that publicly traded miners will continue to capture a larger share of the hash rate over time as they compete to stay profitable post-halving.

Counter-seasonal trend

September has historically been dubbed a bearish month for bitcoin, with historical data from Coinglass indicating an average price decline of 4%. However, this year has defied that trend, with bitcoin posting a 7% increase so far. This counter-seasonal trend could be indicating that due to the lower bitcoin price and rising hashrate, the price could be playing catch up with the hash rate, potentially setting up for another rally. Of course, there are other market factors such as interest rate decisions could also catalyze this price change.

Additionally, the next difficulty adjustment, scheduled for Sept. 25 and projected to decrease by 5%, could also indicate that prices may be catching up. Blocks are currently being mined at an average of 10.5 minutes, according to mempool.space. This indicates a potential slowdown in the hash rate as price plays catch up.

Miners accumulating

Another factor that could signal a potential rise in price is what miners are doing with their mined bitcoin.

Glassnode data indicates that from November 2023 to August 2024, miners consistently sold bitcoin to fund their operations due to the halving, marking one of the longest periods of sell pressure on record.

However, in the past 30 days, miners began accumulating bitcoin in their wallets, suggesting that the financial strain from the halving is largely over. If miners are distributing less bitcoin, this reduces the supply entering the market, increasing the chance of potentially helping the price.