Can mining companies save the appeal of cryptocurrency?

Mining companies are booming despite the slowdown of BTC and the crypto market. The leading mining stocks are still rising on expectations of their pivot into AI. 

Crypto mining companies are still inviting market enthusiasm, driven by their pivot from BTC mining to AI. The sector shows that relationships with crypto may be a benefit to the companies. Some are sitting on legacy BTC treasuries, acquired at a lower mining price. 

The companies managed to use BTC to finance their expansion into AI data centers, securing electricity for upcoming data centers. 

Are crypto mining companies still undervalued? 

The chief narrative driving BTC mining companies is that they are still undervalued. The shares of IREN and other leading crypto mining companies rallied in the past day, with most of the US-based companies in the green. 

At the same time, BTC is showing signs of being oversold and undervalued at levels just below $70,000. However, the worsening crypto sentiment may make traders shift to mining companies as a source of growth. 

Most mining companies are also passive treasury holders, but MARA shares have not benefited from the reserves, as they are among the worst performers. IREN still drives the strength of crypto mining stocks, currently hovering around $45.52.

Will crypto miners capitulate? 

The rising prices of crypto mining stocks raised the issue of mining capitulation to cut losses. Currently, some miners may be producing at a cost higher than the market price. This does not apply to all miners, and some legacy operations may still be profitable. 

Miner reserves show the period of holding through volatility is now over. Miners hold 1.8M BTC, down from 1.89M in the past few months. 

The main source of selling may be the reserves of Mara, as well as Cango’s stash of over $700M in BTC. The pivot to AI and high-compute data centers may be one of the reasons to drain miner treasuries. While BTC has dropped by 50% from its highs, treasuries are still capable of supporting further expansion into new AI data centers. 

The capitulation may not be due to the weakness of BTC, but due to demand for AI, and potentially covering some of the debt from building data centers. 

Recently, Cango sold 4,451 BTC, retaining 3,645 BTC in its reserves. Other miners are mostly retaining their remaining balance, but Cango aimed to boost its balance sheet with around $305M in BTC, dedicated to capital expenses. 

The selling is not haphazard for now, and miners have not shown real signs of capitulation or abandoning the network. Hashrate recovered to 963 EH/s, showing the already built BTC centers are often profitable enough to keep running even at a lower price range. The winter slowdown of mining from hydroelectric power is still not a sign of capitulation, and some pools even increased their total hashrate.