What happened
Shares of cryptocurrency-mining companies Riot Blockchain (RIOT 4.76%) and Marathon Digital Holdings (MARA 0.19%) continued their descent on Wednesday. As of 3:15 p.m. EST, Riot Blockchain stock was down 12% and Marathon Digital stock was down 13%. Popular cryptocurrency Bitcoin (BTC 1.04%) is down roughly 5% over the last 24 hours, which is likely playing a roll in the pair's decline.
So what
Both Riot Blockchain and Marathon Digital mine Bitcoin -- they provide computing power to help process transactions on the Bitcoin blockchain network, unlocking new Bitcoins as compensation in the process. As of the end of April, Riot Blockchain had mined 697 Bitcoins so far in 2021. For its part, Marathon Digital had mined 386 Bitcoins this year, as of May 6.
Image source: Getty Images.
As of its latest update, Riot Blockchain is holding 1,771 Bitcoins, all of which it received from mining. For its part, Marathon Digital is holding 5,324 Bitcoins, but over 4,800 were purchased with funds raised by selling new shares of the company.
Considering the current price of Bitcoin is around $54,000, Riot Blockchain's Bitcoin is valued at $95.6 million and Marathon Digital's is valued at $287.5 million. With holdings this large, it's not surprising to see these two stocks fall whenever Bitcoin takes a step back.
Moreover, it's hard to find many stocks that are up today, anyway -- almost everything is down as investors fret about inflation. These two combined factors are why these stocks are down today.
Even with the recent pullback, both Marathon Digital stock and Riot Blockchain stock are still beating the S&P 500 in 2021. RIOT data by YCharts.
Now what
Both Riot Blockchain and Marathon Digital stocks were popular with short-term traders in 2020 and early 2021. After all, why wouldn't they be? From Jan. 1, 2020 through Feb. 17, 2021, Riot Blockchain and Marathon Digital were up over 6,000% and 5,000%, respectively. These rapid gains had some traders scrutinizing the charts for patterns as they tried to profit from shares swinging higher and higher.
Things can change fast, though. Both Marathon Digital and Riot Blockchain stocks are now down over 60% from highs reached earlier this year. It's a reminder that short-term patterns can break down, especially when something changes with the business. That's why I advocate for buy-and-hold investors to focus on business results, not tickers on a chart.
What changed for these two? Previously, the price of Bitcoin was steadily climbing at a breakneck pace. But the popular cryptocurrency has been rangebound for about the last three months. Therefore, for Riot Blockchain and Marathon Digital to retake previous highs, they'll need Bitcoin to start pulling its weight again. But knowing if and when Bitcoin will rise again is a hard thing to predict.
