The surge in crypto mining stocks is a relief for the industry after a rough year in which publicly traded crypto mining companies took on $4 billion in debt.

Bitcoin’s rally to multi-month highs also had a positive impact on mining stocks. Many crypto mining stocks posted their best monthly performance in a year. The surge in mining stocks has also eased pressure on struggling miners, who have had to sell large amounts of mined bitcoin to increase liquidity in 2022.

Bitfarms, one of the largest bitcoin mining companies, soared 140% in the first two weeks of January 2023, followed by Marathon Digital Holdings, which surged 120%.The value of Hive Blockchain Technologies’ shares nearly doubled in the same period, while the MVIS Global Digital Asset Mining Index rose 64% in the first month of the new year.

The Luxor Hashprice Index, which attempts to quantify the amount of money miners can potentially make from the processing power used by the bitcoin network, is up 21 percent this year. This is partly a reflection of the higher returns from the rising price of bitcoin.

The bull market in 2021 prompted several mining companies to go public, while others invested heavily in equipment and expansion. However, the long crypto winter of 2022 exposed the vulnerability and lack of proper structure of many of these mining companies.

During the bull market of 2021, the bitcoin mining industry saw a significant increase in borrowing, which negatively impacted their finances during the subsequent bear market. Publicly traded bitcoin miners have over $4 billion in debt, while the top 10 bitcoin miners have nearly $2.6 billion in debt.2022 In late 2022, leading bitcoin miners such as Core Scientific filed for bankruptcy.

Liabilities of publicly traded bitcoin mining companies Source: Hashrate Index

Bitcoin’s January price spike helped lift beleaguered crypto mining stocks to new highs for the year, but it also helped bitcoin-based exchange traded funds (ETFs) outperform most of the traditional equity ETF market.