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Bitcoin Mining Stocks Swim Against the Tide

Bitcoin mining stocks are outperforming Bitcoin, fueled by hopes of diversification for mining companies and strong individual performances.

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Bitcoin (BTC) has been trading sideways recently, stuck within a narrow price channel – certainly not the exciting growth many investors were hoping for. But recently, more action can be seen among Bitcoin mining stocks, which are defying the trend and experiencing a pump.

According to a recent report by JP Morgan, nearly all of 14 miners had performed better than Bitcoin in the first two weeks of June. Core Scientific was the leader, increasing 117%, while Bitcoin fell by over 3% in value during that same two week span.

A key driver of the surge seems to be the prospect of diversification for mining companies. According to JP Morgan, the recent deal between Core Scientific (CORZ) and CoreWeave, an AI firm, sparked investor enthusiasm. This partnership suggests that mining companies are exploring ways to generate revenue beyond just mining Bitcoin, which could lead to more stable and attractive investment opportunities.

The report also highlighted that US-listed Bitcoin mining stocks reached a record total market cap of $22.8 billion in June, underscoring the growing investor interest in this sector.

"Mining stocks outperformed Bitcoin last week, spurred by Trump’s announcement of his intent to make the U.S. a mining powerhouse. Bitfarms led the charge with a 34% increase, followed by CleanSpark with a 19% gain," noted brn analyst Valentin Fournier.

"Over the past week, we observed a decrease in miners' reserves, along with declines in HashPrice (rewards for computing power) and Hashrate (computing power). This trend suggests that mining power is diminishing as older mining devices become unprofitable and are repurposed for other uses, such as AI," he noted.

Given this backdrop, Marathon Digital Holdings (MARA) is aggressively expanding mining capacity to capitalize on crypto growth, including recent expansion efforts in Texas. Its hashrate is expected to double to 50 EH/s in 2024, and recent data center acquisitions have boosted mining capacity to over 1 gigawatt.

Riot Blockchain (RIOT) has major hash rate expansion plans underway and is growing via acquisitions. Their focus on sustainable mining practices could be another reason for investor attraction.

Bitfarms Ltd. (BITF) also recently announced expansion efforts, with an agreement for a $3.7 million deal to bring up to 120 MW of power online via a new site in Sharon, Pennsylvania. With this deal, Bitfarms is estimated to increase total power capacity by 170% to 648 MW in 2025, up from 240 MW currently.

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CleanSpark Inc. (CLSK) just announced the acquisition of five new Bitcoin mining facilities in Georgia, Adding 60 MW of infrastructure. The company also said it is expected to increase its operating hashrate to over 20 EH/s by month's end using already purchased hardware.

"This achievement underscores our commitment to scaling efficiently and sustainably and we are excited to bring these facilities into the CleanSpark way of mining bitcoin. We are confident in our continued ability to drive shareholder value and innovation in the bitcoin mining industry," CEO Zach Bradford said.

The inherent volatility of Bitcoin mining stocks remains a critical factor to consider, with key considerations including energy costs, increased mining difficulty post-Bitcoin halving (April 2024), and the regulatory environment.