Bitcoin Mining Stocks Can Decline More Sharply Than Bitcoin

Shares of bitcoin miners are attractive to investors looking to benefit from rising bitcoin prices, but their prices can fluctuate much more dramatically than bitcoin itself. This is because investors are not only betting on the cryptocurrency but also on an entire company with costs such as machinery, electricity, and financing risks. On October 15, shares of IREN, Core Scientific, TeraWulf, and Cipher Mining fell more than 12 percent on Wall Street. The revenues of miners depend on the bitcoin price, while costs such as electricity, personnel, and maintenance do not automatically decrease. According to the Cambridge Digital Mining Industry Report, more than 80 percent of the operational costs of miners consist of electricity. Competition and the difficulty of the network also affect the rewards for miners. Additionally, the reward per found block is halved approximately every four years, putting further pressure on revenues. Many miners are shifting their focus to artificial intelligence, which can provide more stable income but makes the stock less suitable as a gauge for bitcoin. Therefore, investors in bitcoin mining stocks are also investing in technology companies that have significant capital needs.

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