Why Crypto Mining Stocks Jumped Today on 14 Feb

The value of Bitcoin (CRYPTO: BTC) soared 5.9% on Wednesday, reaching over $1 trillion in market cap. This boosted the performance of crypto mining stocks, which saw double-digit gains in the morning trading.

Some of the best crypto mining stocks that benefited from this surge were Hut 8 (NASDAQ: HUT), CleanSpark (NASDAQ: CLSK), Marathon Digital (NASDAQ: MARA), and Riot Platforms (NASDAQ: RIOT). These stocks increased by 19.5%, 18.8%, 15.6%, and 11.9%, respectively, at their peak. By 10 a.m. ET today, they were still up by 17.8%, 10%, 11.6%, and 10.6%, respectively.

The Bitcoin pop

Bitcoin seems unstoppable in its upward trend. The cryptocurrency is not affected by the expectations of higher interest rates, and the industry is gaining momentum.

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One of the latest signs of this growth is the iShares Bitcoin Trust reaching 100,000 bitcoins under management, which is equivalent to about $5.2 billion in value.

There is also anticipation that the halving event scheduled for mid-April will trigger another spike in Bitcoin’s value. These events can sometimes be a case of “buy the rumor, sell the news,” but for now, the rumor is still driving the market.

Miners win all around

There are two reasons why mining stocks are rising along with today’s move. The first one is that the higher price of Bitcoin makes their businesses more profitable, as their mining costs (such as rigs, electricity, etc.) remain the same, but their revenues increase, creating operating leverage.

The second one is that most of these companies have a lot of exposure to the crypto, as they hold it on their balance sheets. When the price of Bitcoin goes up, their balance sheets also improve.

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This kind of leverage means that days like today are possible, where mining stocks outperform Bitcoin by a large margin. But it also means that today’s gains can be reversed with a downward move tomorrow.

What’s the future of Bitcoin?

The movements in Bitcoin today and in the past few months have not been based on any fundamental improvement in the utility of the token. Instead, they have been driven by the inflow of funds into Bitcoin from speculators who expect exchange-traded funds (ETFs) and then the launch of these ETFs on the market.

Given the recent influx of money into the crypto market, it is very likely that this momentum will continue for a while. However, I think investors should be careful about when the momentum trading will end.

Bitcoin still has its place as the “digital gold” in the crypto market, but there is much more innovation and development happening on smaller, faster blockchains. And these could ultimately be disruptive to Bitcoin.

best crypto mining stocks

If we see more ETFs approved for digital currencies other than Bitcoin, it could also shift the momentum to a broader crypto rally, where more investors can participate and have more choices than the currency with the largest market cap.

Investors need to understand the upside and the downside risks. For now, the market is rewarding Bitcoin, miners, and their investors with sharply higher valuations.

FAQ for crypto mining stocks

Q: What are crypto mining stocks? A: Crypto mining stocks are companies that operate large-scale facilities to mine cryptocurrencies, such as Bitcoin, Ethereum, Litecoin, and others. These companies use specialized hardware and software to solve complex mathematical problems and verify transactions on the blockchain, earning rewards in the form of new coins and transaction fees.

Q: Why are crypto mining stocks volatile? A: Crypto mining stocks are volatile because they are influenced by several factors, such as the price of the cryptocurrencies they mine, the difficulty and competition of mining, the cost and availability of electricity, the regulatory environment, and the innovation and adoption of new technologies.

Q: How can I invest in crypto mining stocks? A: There are different ways to invest in crypto mining stocks, depending on your risk appetite, investment goals, and preferences. Some of the common methods are:

  • Buying shares of publicly traded crypto mining companies, such as Hut 8, CleanSpark, Marathon Digital, and Riot Platforms. These stocks are listed on major exchanges, such as NASDAQ and TSX, and can be bought and sold through online brokers or platforms.
  • Buying shares of private or emerging crypto mining companies, such as Bitfury, Bitmain, Argo Blockchain, and Hive Blockchain. These stocks are not listed on major exchanges, but can be accessed through private placements, crowdfunding platforms, or over-the-counter markets.
  • Buying exchange-traded funds (ETFs) that track the performance of crypto mining stocks, such as the Amplify Transformational Data Sharing ETF (NYSEARCA: BLOK), the Bitwise Crypto Industry Innovators ETF (NYSEARCA: BITQ), and the VanEck Vectors Digital Transformation ETF (NASDAQ: DAPP). These ETFs are diversified portfolios of crypto-related stocks, including miners, exchanges, custodians, and others.
  • Buying contracts for difference (CFDs) or options on crypto mining stocks, which allow you to speculate on the price movements of the underlying stocks without owning them. These derivatives are leveraged instruments, which can magnify your profits or losses, depending on the market direction.

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