What Happened
Cryptocurrency mining is as volatile as it is intriguing, and many investors are seeing this volatility on display today. However, unlike most price action this year, today’s moves among most major crypto mining companies are directionally positive.
As of 11:30 a.m. 00 м. Leading the way in terms of earnings are Bit Digital (BTBT) and Riot Blockchain (RIOT), which are valued at 18.4% and 17.4%, respectively. Hut 8 Mining (HUT), Bitfarms (BITF) and Hive Blockchain (HIVE) also saw gains ranging from 10.5% to 13.5% since yesterday’s close. And even China-based crypto mining equipment maker Canaan (CAN) saw gains of 8.5% this morning.
These moves appear to be driven by bitcoin price stabilization. This week, investors have seen a broad recovery in the price of Bitcoin, which now sits right around $21,500 a token. That’s a far cry from Bitcoin’s high of about $69,000 per token last year. However, this level also represents the upper side of more than 20% of Bitcoin’s 52-week low of $17,708, hitting last weekend.
Interestingly, the strong price effect Bitcoin has seen through its rally from this weekend’s lows in recent days has been overshadowed by more bearish news for the crypto mining sector. The Iranian government has reportedly announced a plan to limit capacity for the country’s crypto miners in an attempt to stabilize the country’s power grid.
So what.
Bitcoin miners (and mining-related stocks) are hit hard by bitcoin price movements. As nominal prices rise, miners are making disproportionately high profits. That’s because these companies’ revenue streams consist almost entirely of Bitcoin, with costs fixed in U.S. dollars. THE DOLLARS ARE ALSO THE MOST IMPORTANT. Thus, exchange rates matter, and this is by far the most important exchange rate for most mining-related stocks.
In addition, cryptocurrency miners have a greater incentive to invest in their infrastructure by raising shares of crypto mining adjoining stocks such as Canaan. When the tide rises, it’s good for this group. Of course, price trends in the market have been too slow lately, leading to massive discounts on these stocks. Thus, some might also suggest that today’s rally is related to a rebound from the bottom. Whether that bounce will be sustained or out of the dead cat variety remains to be seen.
Now what
This impressive move higher in battered crypto mining stocks provides an intriguing storyline for crypto investors watching from the sidelines. Questions about whether capitulation is really finally taking hold in cryptoland are now numerous. Indeed, if the market is approaching a low point, these high-risk, high-growth stocks may start to look attractive.
While the global regulatory environment remains uncertain, it is clear that some speculators still exist. Perhaps “buy gravy” is not dead. At least not everyone is selling the rip today.
