• Bitcoin gained 16% year-over-year (YoY).
  • Only two of the top bitcoin miners outperformed bitcoin.

Volatility is the key word for understanding bitcoin’s price action during 2021. For review, bitcoin's price twice eclipsed record highs past $60,000 per coin, only to be cut with 40-50% corrections in June and November, respectively.

Unfortunately, volatility in bitcoin generally leads to miners underperforming. Alpha – the excess return of a stock over another asset, in this case bitcoin – was poor for the larger sector.

Only two of the top bitcoin miners outperformed bitcoin over the year: Canadian mining firm Hut 8 (HUT) and US miner Marathon Digital Holdings (MARA). Hut 8 led the mining pack, generating 10% in alpha over bitcoin. Marathon, on the other hand, eked out only 1% in excess returns over bitcoin.

Up-and-coming miner Bitfarms (BITF) kept pace with bitcoin as share price appreciated 16% over the year while industry leader Riot Blockchain (RIOT) share price declined by 28% – a significant underperformance versus bitcoin. The worst performer included in this analysis was Bit Digital (BTBT), which under-delivered against bitcoin by 68%.

The data makes the case: most investors would have been better off simply buying and holding bitcoin over the past year rather than holding mining stocks. The charts below show how much $10,000 would now be worth if invested in each of the mining stocks and bitcoin.

  • A $10,000 investment in BTC from January of last year to now would be worth $11,581.
  • The best-performing miner, HUT, turned $10,000 into $12,586.

Still, it's likely once bitcoin resumes its uptrend miner profits will improve and therefore the alpha. Miners continue to expand operations at a record pace, and so far, seem to be unaffected by supply chain constraints as ASICs are delivered on schedule.

The rate of operation expansion and continual accrual of bitcoin onto public firm balance sheets, despite weak price action, make the trend likely to continue.