Bitcoin mining companies have outperformed bitcoin by a wide margin during the top cryptocurrency’s recent bullish price action.

So far in 2023, the stock prices of the top nine bitcoin listed companies by market value have increased by an average of 257.14%. This figure is almost three times the increase of Bitcoin (BTC) during the same period.

The higher returns represent the leveraged beta effect that mining stocks enjoy. Leveraged beta suggests that these stocks outperform the broader market during bitcoin upswings and face greater downside risk when bitcoins fall.

Due to its high leverage beta, Bitcoin’s price performance will remain a key factor in determining the direction of mining stocks.

Trends in the mining industry suggest that miners are positioning themselves for long-term growth by purchasing more machines. However, they have yet to exhibit the level of accumulation that matches the previous bull market, suggesting that the uptrend in stocks may stall in the medium term.

Performance of listed bitcoin mining stocks. Source: Cointelegraph

Several mining companies have expanded over the past month, adding to the positive sentiment and long-term value of the stock. Meanwhile, mining conditions have improved as hashrates have fallen and prices have risen.

However, on-chain data shows that miners have sold off a significant portion of their holdings, which could be a sign of a recent downturn.

Mining companies make massive moves

U.S.-listed miners made aggressive moves in June, signaling the industry’s long-term strength.

Hut 8 Mining (HUT8) has merged with United States Bitcoin Corporation (USBTC), increasing its total hash rate to 9.8 EH/s, making it the third largest public mining entity in the United States.However, it also borrowed $50 million from Coinbase for general corporate purposes.

Cleanspark (CLSK) invested $9.3 million to increase its hash rate by nearly 1 EH/s.

Meanwhile, Riot Blockchain (RIOT) has struck a $170 million deal with mining hardware manufacturer MicroBT to nearly double its hashrate capacity when fully deployed by 2024.

Bitcoins held by listed mining companies.Source: Mining Magazine

Mining stocks are primed for a short squeeze

Marathon Digital Holdings (MARA) is one of the most talked about companies short circuit Nasdaq stock, 25.06% of shares outstanding short circuit, according to Fintel data. For reference, values ​​above 10% are considered critical shortages.

Likewise, 14.54% of Riot’s outstanding shares are shorted – up from 13.48% in May – compared to 22.32% for Cipher Mining (CIFR).

Between 5% and 10% of the remaining outstanding shares are sold short, representing a relatively neutral market stance.

The increase in short interest in MARA, RIOT, and CIFR is likely due to excessive debt and stock dilution, which negatively impacted existing shareholders’ profitability.

Mining profits improve, but miners are selling

Coin Metrics’ single-hop supply metric, which represents the holdings of wallets receiving tokens from mining pools, shows that holdings by these addresses have fallen to their lowest levels in almost a year.

One stop supply for bitcoin miners. Source: Coin Metrics

Glassnode data also records a large number of miner coins transferred to exchanges. Exchange inflows have even surpassed levels seen during the 2021 bull run.

Additionally, miner holdings remain near two-year lows, likely due to lower profitability for most of 2023.

In early June, the total hashrate of the network reached an all-time high. However, that number has been dropping during the Texas heat wave. The drop in hash rate and the rise in Bitcoin price above $30,000 has helped increase the profitability of miners.

The most commonly used mining model, the Antminer S19, can cost anywhere from $20,000 to $25,000 to produce, depending on electricity costs.

It’s worth noting that companies such as Riot that own mines in Texas may suffer some losses due to the climate. However, these companies are likely to take steps to hedge against heat waves, as this is not the first time they have experienced one.

related: Riot Blockchain’s Bitcoin Mining Productivity Drops 28% YoY Due to Record-Breaking Texas Heat

However, despite improved profitability, miners are still selling Bitcoin, which could be a sign of future price declines.

While revenues improved in June, miners continued to spend on expansion and operating costs, suggesting the cryptocurrency bull market has yet to begin.

The company’s expansion plans and declining on-chain miner holdings point to sideways price action in the medium term, or a possible correction in mining stocks if the price of Bitcoin falls.