– This year, most public crypto companies have underperformed Bitcoin, with mining firms taking the biggest hit.
– Core Scientific, the largest Bitcoin mining company, saw the biggest drawdown of 99%, leading to the firm filing for bankruptcy.
– Other miners have also sustained major losses, with most of them being 90% or more underwater for the period.
Crypto companies have had a rough year in 2022, with most of them significantly underperforming Bitcoin. According to the year-end report from Arcane Research, many of the larger public firms in the digital asset sector saw their valuations decrease by significant amounts, with some of them even hitting double-digit losses.
One of the worst affected companies is Core Scientific, one of the largest Bitcoin mining companies. The firm has seen its market cap drop by an astonishing 99%, leading to the firm filing for Chapter 11 bankruptcy earlier in the month. Other mining firms have also suffered during the year, with most of them ending up 90% or more underwater by the end of the year.
The deep red performance of the public companies in the digital asset sector | Source: Arcane Research’s 2022 – Year in Review
The main factor behind the mining companies’ poor performance is the rise of mining difficulty over the past year. As more miners join the network, competition for profitable blocks increases, resulting in a higher mining difficulty. This has caused miners to incur higher costs while their returns remain the same, leading to lower profits and, ultimately, lower valuations.
The performance of the crypto sector’s public companies has been a stark contrast to that of Bitcoin. While the asset experienced a 65% drawdown in its valuation, the larger crypto companies’ stocks have performed significantly worse. Even Microstrategy, the company whose stocks’ main attraction is exposure to BTC through its large reserves, showed a deeper year-to-date drawdown of around 74%.
Coinbase, one of the most popular crypto exchanges, has seen its market cap drop by 87% this year. This has led to the firm being valued lower than meme coin Dogecoin, something that would have been unthinkable just a few months ago.
It’s not just the mining companies that have had a rough year. The entire crypto sector has seen its valuations drop significantly, with most of the larger public firms experiencing losses of at least 90%. This has been a worrying trend for the industry, as it suggests that the wider public sector is not confident in the long-term prospects of digital assets.
While the crypto sector has seen some tough times this year, there is still hope for the future. The industry is still in its infancy and there is a lot of room for growth in the coming years. With the right investment and legislation in place, the sector could once again become a profitable space for investors and companies alike.