Bitcoin Mining Is Cool Again; We Can Thank Africa, Prudence and Growing Hashrate for That

Crypto mining companies have struggled mightily in 2022. But over the last week or so the tide may be turning. One shred of evidence came from Barclays, which initiated equity research coverage on Core Scientific (CORZ) earlier last week, issuing an “overweight” rating.

Now, an “overweight” rating isn’t a “Buy this now, oh my goodness, what a steal! This stock is liable to rip your face off” rating; instead it’s more of a “Hey, this thing will perform well compared with its peers.” Basically, “If mining stocks don’t all go up, at least CORZ won’t go down as much as the others.”

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Not exactly a strong suggestion that mining is back, but it’s objectively better than, “Everything is going to zero and our best days are behind us.” But beyond this one stock rating and otherwise positive stock performance the last two weeks (see below), the tide against mining is turning. Mining is cool again.

Banks’ equity research teams spend time writing about companies because a) the banks think the companies operate in an important industry and b) the covered companies might need to raise capital some day, and they just might choose that bank to raise capital on their behalf if they get a nice writeup.

Barclays initiating coverage on Core Scientific itself isn’t too far out of bounds. But what was a bit surprising (at least to me) was the report mentioning that “we remain positive on the long-term viability of bitcoin” and “We view CORZ positively in light of … our long-term bullish view on BTC …”

Barclays isn’t some nobody bank pandering for clout, so if the idea that bitcoin has long-term viability penetrates more and more banks, the financiers at these banks will be excited about the opportunity of servicing the mining businesses that secure the Bitcoin network. But for now, let’s put Wall Street aside and shift our focus to Africa.

Read more: ‘Wall Street’ Doesn’t Need Bitcoin; Bitcoin Doesn’t Need ‘Wall Street’

But here’s why I’m not pessimistic.

Things got tough for mining companies, and the companies that have survived are the companies that were operating responsibly and prudently. Some companies were taking advantage of the cheap capital available to them because of low interest rates to run their business, and that’s simply not possible anymore in a rising interest rate environment. The mining companies that have endured this shakeout are simply the best of the bunch.

On top of that, creative ideas, like rural micro-hydro plants that mine bitcoin in Kenya, are cropping up and the injection of creativity into the space gives me optimism.

To cap it off, the network’s hashrate is growing quickly in spite of the fact that bitcoin’s price isn’t really exploding – typically a higher bitcoin price would encourage more people to mine since the rewards are potentially greater. So instead of miners simply piling into the network in a quest for massive gains in bitcoin, they are joining because it is a prudent business decision now that the network has proven staying power.

Not to mention, October is a historically positive performing month for bitcoin, so bitcoin trading in a tight band between $19,000-$20,000 might not last very long.

So, with all of these things in, I’ll say it again: Mining is cool again.

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