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Elizabeth Warren and Chinese Regulators Sink Crypto Miner Canaan, Down 25%

By Chris MacDonald – Dec 3, 2021 at 8:48AM

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The discussion around energy usage is picking up for crypto miners, and Canaan is feeling the pain today.

What happened

Crypto miners as a whole are seeing a tremendous amount of selling pressure today. Right now, one of the biggest losers in this sector is Canaan (CAN -6.17%), down nearly 25% as of 12:30 p.m. ET. At today's lows, Canaan dropped more than 28%.

As a China-based crypto miner, Canaan has been hit very hard this year. Currently, Canaan is down nearly 85% from its 52-week high, mainly on news of continued Chinese regulatory crackdowns on crypto mining. 

However, today's news that Didi (DIDI -2.28%) has been asked to delist by Chinese authorities has sent nearly all Chinese-based, U.S.-listed companies lower today.

The U.S. has largely taken over the mantle of the crypto mining jurisdiction of choice for companies. However, today, reports that U.S. Senator Elizabeth Warren sent a letter to Greenidge (GREE -4.02%) CEO Jeff Kirt Thursday afternoon has investors in the crypto mining sector spooked. This letter requested more information about the impact crypto mining has on climate change, power prices, and other environmental concerns. Reportedly, this is the first request for information from crypto miners from Warren, and among the first inquiries into this aspect of crypto mining in the U.S.

Flag representing China, U.S. and EU.

Image source: Getty Images.

So what

There's a lot to unpack for Canaan today.

Of course, Chinese delisting concerns are a big deal for any company headquartered with a Chinese address right now. For Canaan, this geopolitical risk has been evident for some time, and is one of the key reasons for this stock's underperformance relative to its peers.

However, other crypto miners have not been spared by the increasing regulatory scrutiny stateside. Miners Riot Blockchain (RIOT 5.56%) and Marathon Digital (MARA -3.92%) were both down approximately 10%, as of 12:30 p.m. ET.

Given the importance of climate change and rising consumer electricity costs to the current administration's platform, it appears crypto miners are seeing geopolitical pressure turn from a localized, regional issue to a more global one. Accordingly, this is a sector that's under significant pressure today.

Now what

Crypto miners such as Canaan have seen much higher volatility than the overall markets of late. However, investors have already seen fit to reallocate capital in this sector to other companies with more substantial operations outside of China. These concerns around Didi's delisting and what they mean for Chinese stocks in general are real.

Concerns about the environmental impact of crypto mining are another massive headwind investors are dealing with right now. Considering that previously these headwinds mostly came from abroad, the move by Warren and U.S. lawmakers to dive into this factor could provide some serious near-term volatility for Canaan and the entire sector.

Right now, I think it's buyer beware for crypto mining stocks. The long list of headwinds facing Canaan certainly warrant a reexamination of this company's valuation. Today, the market appears to certainly be doing so, with the price action of major crypto miners such as Canaan indicating capital is moving out of this space rapidly.

Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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