Shares of Bit Digital (BTBT -2.35%) fell on Tuesday morning along with many other cryptocurrency stocks. If anything, the company had positive news to report. But as of 11 a.m. EDT, the stock was down 4% nonetheless.
Bit Digital mines Bitcoin. Companies like this are paid in Bitcoin for their services that make the blockchain network work. Therefore, when the price of Bitcoin is going up, investors would bid stocks like Bit Digital higher, since its Bitcoin payouts are more valuable. However, Bitcoin had a small pullback early this morning, resulting in cryptocurrency stocks being down today.
However, Bit Digital did make an announcement today. During the first quarter, it purchased 4,871 new machines for mining Bitcoin, which will soon be set up and made operational. The speed of mining systems is measured in something called a "hash rate." These new mining machines add 324 petahashes per second (PH/s) to Bit Digital's total hash rate.
Adding 324 PH/s increases Bit Digital's hash rate by more than 14%. However, this development should be kept in context. Almost every Bitcoin-mining company is increasing its hash rate. For example, Marathon Digital Holdings made a similar announcement yesterday. In other words, the overall hash rate of the Bitcoin blockchain network is growing.
According to Blockchain.com, the total hash rate for Bitcoin went up roughly 15% from Dec. 31 to March 31 -- the same period during which Bit Digital was acquiring new mining machines. Therefore, it appears that the company is merely keeping pace with the network's growth in Q1, and its reward for mining Bitcoin should stay roughly the same as a result.
This is just reality for cryptocurrency miners. When cryptocurrency prices are going up, companies increase their hash rates to take advantage of the higher payout. To stay competitive, they have to increase their hash rate to keep up. But if prices fall, miners risk not being able to break even on their expanded operations.