The stock price of cryptocurrency miners depends almost entirely on the price of Bitcoin. When Bitcoin fell to below $42,000 last week, it triggered a sell-off in crypto-miner stocks. Marathon Digital (MARA) and Riot Blockchain (RIOT) lost ground.
Markets are pricing in higher interest rates in the coming weeks. Investors should notice the direct correlation between Bitcoin and the Federal Reserve. Previously, the sector assumed decentralized currency and Bitcoin would move independently to monetary policy. Mining stocks are more exposed than the underlying cryptocurrency. Those firms have electricity costs that will have an impact on their earnings.
Bitcoin and Ethereum Prices
Long-term bitcoin and Ethereum investors may forecast higher prices by the end of 2022. Holders who are not leveraged may expect a decline in hash rates as supply falls. That would benefit mining companies like Marathon and Riot.
Risks
Political tensions between the U.S. and China and the riots in Kazakhstan will continue to destabilize stock markets. The fear already hurt Bitcoin prices. Expect an increase in volatility for mining stocks. Investors should consider trading the price swings. Investors who have a goal of building a small position in cryptocurrency may consider buying the underlying asset instead. That would remove the cost variables from the risk equation.
