Public Crypto Companies Take a Beating in 2022, Underperforming Bitcoin
• Most public crypto companies have underperformed Bitcoin this year, with mining firms taking an especially hard hit.
• Microstrategy’s stock value decreased by 74%, while Coinbase’s market cap went down by 87%. Core Scientific recorded a drawdown of 99%.
• The main reason for the poor performance of the mining firms is a decrease in the price of Bitcoin and increasing difficulty of mining.
The year 2022 was a challenging one for the public companies in the crypto sector. According to the year-end report from Arcane Research, most of the big players in the market observed drawdowns in their valuations. Bitcoin, the leading cryptocurrency, performed poorly with a negative return of around 65%. However, the large public crypto firms had an even worse performance.
Microstrategy, a company whose stocks are mainly driven by exposure to Bitcoin through its large reserves, observed a year-to-date drawdown of 74%. Coinbase, a popular crypto exchange, saw its market cap reduced by 87%, which caused it to be valued lower than meme coin Dogecoin. Core Scientific, one of the biggest Bitcoin mining companies, had the worst performance, with a drawdown of 99%. This resulted in the firm filing for Chapter 11 bankruptcy earlier in the month. Other BTC miners also sustained major drawdowns this year, with most of them being 90% or more underwater for the period.
So what caused the mining firms to perform so poorly? The main reason can be attributed to a decrease in the price of Bitcoin and the increasing difficulty of mining. The slump in the price of Bitcoin over the past year has caused mining firms to experience a decrease in their profits. Additionally, the difficulty of mining has increased due to the increased competition in the sector. As a result, miners have had to invest more in new equipment in order to remain competitive, further increasing their operating costs.
All in all, 2022 was a difficult year for public companies in the crypto sector. With the price of Bitcoin and the difficulty of mining both increasing, miners found it difficult to stay profitable. The result was a deep red performance for most of the public companies in the digital asset sector.