why miners don't track the price of Bitcoin
$Riot Platforms(RIOT.US$ $Marathon Digital(MARA.US$ Most people just view investing in miners as a bet on Bitcoin. This is incorrect and could cost you. there are 2 main inputs that go into the stock price of miners other than the price of Bitcoin
1) depreciation of the mining hardware.
2) Block reward
these 2 things together explain the relative underperformance of Miners compared to Bitcoin. I'm going to talk mostly about RIOT here but the concepts apply to all miners.
During the bull market of 2020-2021 when block rewards and the price of btc were high RIOT still lost money. This is mostly due to depreciation of their miners. Once a new generation of ASICs hit the market their old ones are uncompetitive and are thus worth a lot less. this means any profits they make are more than offset by the cost of the new ASICs they have to buy every 2-6 quarters to stay competitive.
As you may know, the rewards granted for the successful mining of a block decrease by 1/2 every ~4ish years. we are coming up on one of these halfing events which effectively means the efficiency of the mining operation also gets 1/2 all else equal. This decrease in profitability also puts downward pressure on the resale value of their hardware.
in my opinion we will continue to see massive underperformance relative to btc mainly due to the misunderstood balance sheet line item depreciation and amortization. If you want crypto exposure just buy crypto.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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Don't chase the fomo. I invest in quality companies long term, and short sell unprofitable companies during the hype.
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70566874 : thank you very much for you comprehensive explanation, my average price 29 , will consider to exit tomorrow
egan1OP 70566874: hey man I'm just glad I could give you some insight.
70566874 : even the production will be half in second quarter, but first quarter the bitcoin production is not half ,so I get the point of the fact, will be careful deal with it
ShooterTheInvestor : spoken like a true btc miner! great post brotha!
Ginvest : Thank you for the clarification. I plant to exit riot at a big loss after reading your article.
SpyderCall 70566874: Don't exit just yet. wait for the momentum to slow down, at least. But the very long-term prospects for miners seem a bit sketchy due to the fact that bitcoin halvings slowly decrease the amount of BTC that miners receive from mining operations.
That being said, maybe they could mine for other cryptos in the future. Does $Ethereum (ETH.CC)$ have a halving cycle?
SpyderCall 70566874: the momentum does look like it is slowing for miners. But not for BTC and ETH. I just looked at the charts. But if BTC continues to rise, then I strongly believe that miners will make new highs.
70566874 SpyderCall: I'm exit already, may be buy in now,
SpyderCall 70566874: I got out of my MARA investment as well. But I am waiting to buy back in. I kind of wish I had already bought back in. I'm indecisive at the moment.
BelleWeather : Ack. I’m holding MARA, RIOT and CLSK. Up 3x and 2x on first two (have had them a couple of years) but bought the third somewhat foolishly. I think I’d prefer to hold FBTC, but am not sure when to convert?
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