The last 12 months have seen constant pressure on Bitcoin's price, which reached a low of $15,790 in December 2022 – a drop of 77%. Delusional crypto markets were not helped by macroeconomic challenges, such as the war in Ukraine and a strengthening dollar. Indeed, companies like FTX, Compute North and Core Scientific (CORZQ) were all exposed in various ways and filed for Chapter 11 protection.

Bitcoin miners suffered accordingly, particularly public companies. In the last year the North American-listed Bitcoin miners saw their share prices drop on average between 85% and 90%, with many forced into selling their BTC hodl to pay for operational and capital expenses.

However, in early 2023 we’ve started to see signs of recovery, as shown in the table above. The price of Bitcoin is up 42.3% in the last month and is 52% higher than its December lows. This recent surge in price has provided an opportunity for more miners to switch on. This has been confirmed with the Bitcoin hashrate increasing by 13.4% and the Bitcoin mining difficulty increasing by 11.3% over the last 30 days.

Bitcoin mining shares have also performed well during this recent surge in Bitcoin price, with an average increase in the last 30 days of 225%. Digihost Technology (DGHI) deserves a special mention, as the company has seen its share price increase by 413% in the last 30 days and rise 576% from its December 2022 low.

Argo Blockchain (ARBK), Greenidge Mining (GREE) and Core Scientific (CORZQ) have also seen significant recovery over the last 5-6 weeks, but it should be remembered that their share prices are still -83.3%, -93.7% and -97.9% down from 52-week highs. Their financial positions have been well-documented, and although Argo Blockchain and Greenidge Mining have avoided Chapter 11, Core Scientific filed for Chapter 11 protection on Dec. 20, 2022.

On a positive note, Riot Blockchain has seen its market capital recently rise above $1 billion again and has become the largest publicly traded Bitcoin miner in North America. However, it should be noted that in February 2021, Riot's market capitalization reached $6.1 billion, so there’s still a way to go to return back to those levels.

Selling in 2022

In 2021 the majority of the North American Bitcoin miners held onto their mined Bitcoin as the price of Bitcoin rose exponentially. It was during this period that miners were starting to utilize the competitive debt markets to raise capital in order to grow hashrate. Two miners, Bitfarms (BITF) and Argo Blockchain, even used cash reserves to boost their hodl by purchasing Bitcoin in January 2022, a decision both would soon come to regret.

From May 2022 as the Bitcoin price continued to plummet, the majority of miners started to liquidate their Bitcoin to pay for operational costs, including debt obligations and capital growth. As shown in the table above, Bitfarms and Argo Blockchain sold significant levels of their coins in 2022 to pay down debt.  

It wasn’t enough to help Argo Blockchain, which eventually had to sell its flagship Helios site in Dickens County, Texas, to Galaxy Digital (GLXY) in late December 2022. The deal let Argo restructure its debt, allow its mining rigs to be hosted by the new provider and more importantly provide much-needed runway to recover.

Hut 8 (HUT) has not sold Bitcoin in over two years and has fervently maintained a cautious ‘balance sheet’-first approach. Its current hodl of 9,086 unrestricted Bitcoin, as of Dec. 31, 2022, with a current value of $211.3 million, places the company in a good position to get through this current bear cycle and consider further buying opportunities in the run-through to the next bull cycle.

Marathon Digital (MARA) has also held the vast majority of its Bitcoin over the last two years, with a hodl as of Dec. 31, 2022, of 12,232 Bitcoin at a current value of $284.2 million. The company has recently entered into a joint venture with FS Innovation, LLC, to form the Abu Dhabi Global Markets, creating two mining sites in Abu Dhabi with a total power capacity of 250 MW. This venture provides the company with an initial 20% stake for its share of the initial costs, totaling $81.2 million. To raise this amount of funds we may well see Marathon start to sell some of its Bitcoin hodl.

Share dilution

In 2022 we saw many miners choose to raise cash reserves through the process of share dilution to cover their costs.  

CleanSpark (CLSK) increased its shares held on Jan. 1, 2022, by 73%. However, it should be noted that it was the only miner to not only achieve but exceed its 2022 hashrate growth strategy of 5.5 EH/s. In fact, CleanSpark actually increased its hashrate to 6.2 EH/s, an impressive 226% increase. Shareholders may view this as a positive outcome.  

In July 2022, Riot Blockchain shareholders approved a motion to increase the number of shares of common stock authorized for issuance from 170,000,000 shares to 340,000,000 shares. This increase will provide the company with a great platform to complete Phase 1, providing 400 MW of power at its Corsicana site in Navarro County, Texas.

A number of other miners have received shareholder approval for ‘at-the-market’ (ATM). This allows companies to incrementally drip sell newly issued shares into the secondary trading market through a designated broker-dealer at prevailing market prices. Digihost Technology approved an ATM equity offering of $250 million on March 4, 2022. It has yet to fully utilize this and will be waiting for the share price to recover further, providing an opportunity for greater revenues.  

Bitfarms announced in August 2021 the launch of an ATM equity program to be conducted by HC Wainwright. The financing will see the company raise up to $500 million via the direct sale of common shares on the Nasdaq.

CleanSpark is requesting shareholders to vote on March 8, 2023, for the company to increase the number of shares of common stock authorized for issuance under the current articles from 100,000,000 shares to 300,000,000 shares, which should provide much-needed capital for the company to achieve its end-of-2023 hashrate growth target of 16 EH/s.

Regardless of the method, the purpose remains clear: gain more capital to deploy more hashrate.

Looking forward to 2023, with the debt markets currently in turmoil, after a number of miners, totaling 11.59 EH/s of hashrate through ASIC-backed loans, defaulted on their payments, Bitcoin miners will look to raise more funds through more dilution and selling Bitcoin to enable them to first survive and also grow their hashrate.  

Even though we’ve seen a rally in Bitcoin price, many commentators are still suggesting the worst is yet to come for some of the North American-listed mining companies.