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Why Crypto Mining Stocks Jumped Today

By Travis Hoium – Oct 25, 2021 at 3:57PM

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Cryptocurrency prices are up and that's pulling miners higher as well.

What happened 

Shares of crypto mining stocks went on a strong run to start the week as cryptocurrencies themselves bounced higher on Monday. At 3 p.m. EDT Bitcoin (BTC 0.65%) was up 4.9% in the last 24 hours while Ethereum (ETH 1.09%) was up 5.3%. Most major cryptocurrencies are moving higher for the day. 

Mining stocks are up big across the board but leading the way are Hut 8 Mining (HUT 0.80%) rising 17.1%, CleanSpark (CLSK 1.79%) jumping 13.1%, and Canaan (CAN 5.43%) moving as much as 14.1% higher. The three stocks are currently trading 16.9%, 13.1%, and 13.1% higher, respectively, as I'm writing. 

Representation of a Bitcoin on a computer chip.

Image source: Getty Images.

So what

Rising cryptocurrencies will help drive revenue and earnings for mining companies long-term, so that's definitely the biggest speculative factor driving these stocks today. The current run higher for cryptocurrencies shows no sign of stopping today, although momentum could turn at a moment's notice. 

The biggest news of the day from these companies was Hut 8 Mining announcing a 35 megawatt mining facility in North Bay, Ontario, that will be online by the end of the year. This is the company's third facility will use a blend of byproduct steam, hydrogen, and natural gas to power the facility. This facility schedule was pushed forward after delays at the company's planned Alberta, Canada, facility.

CleanSpark added another 2,250 mining units to its plans last week, bringing its total miners being added in the next year to 26,830. 

Higher cryptocurrency prices along with more mining units should lead to better financial results for these companies and at the end of the day that's what's going to drive the stocks higher

Now what

Volatility has worked in the favor of Bitcoin miners recently and today is a great example of that. But investors should keep in mind that momentum can change directions and head lower as well. 

What I'll be watching over the next few weeks is what earnings and guidance looks like for crypto miners. The industry has been riding a wave of momentum for months and that should lead to strong financial results. And with profits pouring from the industry we should see mining expansion and even some share buybacks from these companies. 

I wouldn't read too much into the crypto mining move today because it was simply following the price appreciation for large cryptocurrencies. But the long-term trend does seem to be for higher crypto prices, which is good for miners, and when we get earnings reports we will see just how strong this price move has been for their operations. 

Travis Hoium owns shares of Ethereum. The Motley Fool owns shares of and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.

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