The data shows that nearly all major cryptocurrency companies have underperformed Bitcoin this year, with mining companies being particularly hard hit.
Most public mining companies saw drawdowns of over 90% in 2022
According to the year-end report from arcane research2022 has been a very difficult year for public companies in the crypto sector. The chart below shows the valuation drawdowns of some of the major players in the market and Bitcoin valuation drawdowns over the past 12 months. is shown.
The deep red performance of the public companies in the digital asset sector | Source: Arcane Research's 2022 - Year in Review
As the chart shows, Bitcoin posted a negative return of around 65% this year, but the performance of large public cryptocurrency companies has deteriorated further.flat micro strategyCompanies whose stocks’ main attraction is their exposure to BTC with large reserves have failed to match their assets, observing a deeper drawdown of around 74% year-to-date.
Popular crypto exchange Coinbase’s market cap has fallen 87% this year, leaving the company’s valuation at meme coinThe worst performer on the list seems to be Core Scientific, which has a drawdown of 99%. Core Scientific is one of the largest companies he has. bitcoin mining companybut due to these heavy losses, the company had to file for Chapter 11 bankruptcy earlier in the month.
Similar to Core, other BTC miners have also maintained large drawdowns this year, with most of them more than 90% underwater during the period. But why did mining companies perform particularly poorly? There are multiple explanations behind it.
“Just as cryptocurrency lenders were incentivized to prioritize short-term growth over long-term sound business decisions to attract private capital, public miners assumed debt and It was incentivized to rapidly expand its share of hashrate to attract more capital,” the report explains.
However, three factors made this bet by these companies unsuccessful. First, interest rates continued to rise this year. Second, the bear market meant that the price of Bitcoin continued to plummet, and the value of miner rewards also declined.
And finally, the third nail in the coffin was rising energy prices. This resulted in very low or no profits for miners as they had to constantly pay electricity bills to keep their facilities running. All these factors cause public miners to collapse under the weight of short-sighted decisions.
In 2023, Arcane Research’s prediction for these publicly traded cryptocurrency companies is that they will file for new Chapter 11 bankruptcies later this year.
Bitcoin is trading around $16,500 at the time of writing, down 2% over the past week.
Looks like BTC has gone downhill in recent days | Source: BTCUSD on TradingView
Featured image of Becca on Unsplash.com, chart on TradingView.com, Arcane Research