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Why Shares of Riot Blockchain, Hive Blockchain, Bit Digital, and Bitfarms Are All Down Today

By Bram Berkowitz – Dec 28, 2021 at 5:20PM

Key Points

  • There is no obvious reason for the decline of cryptocurrencies today.
  • Potential reasons include concerns about the omicron variant, monetary policy in 2022, and tax-loss harvesting.

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Crypto mining stocks struggled today, along with the broader crypto market.

What happened

Shares of several crypto mining stocks fell today along with the broader cryptocurrency market for no obvious reason other than broader trends that have been playing out over the last month. Shares of Riot Blockchain (RIOT 13.81%) fell 8.5% today, shares of the Canada-based Hive Blockchain Technologies (HIVE 8.25%) fell 9.4%, shares of Bit Digital (BTBT 7.35%) fell more than 5.3%, and shares of Bitfarms (BITF 6.03%) fell 11.7%.

So what

Being in the business of mining cryptocurrencies like Bitcoin (BTC 5.68%), most crypto mining stocks tend to move in correlation with the broader crypto market, which is struggling over the last month, with the price of Bitcoin down about 16.5%.

Bitcoin had seemed to be rallying over the past few days, with the price up to $52,000, but it started to fall last night, a move that then continued today. Bitcoin traded around $47,720 as of 4:10 p.m. ET. The sharp decline over the past 24 hours resulted in $300 million in forced liquidations on crypto futures contracts. 

Cylinders descending left to right.

Image source: Getty Images.

Although many believe Bitcoin to be a potential hedge against inflation, so far investors have treated the world's largest cryptocurrency like a lot of growth and tech stocks that have also struggled over the last month. When the Federal Reserve indicated that it would speed up the tapering of its bond-buying program and potentially raise interest rates multiple times in 2022, investors began to heavily sell off tech and growth stocks.

"It's still a fringe investment because I don't think people really understand what they want it to do," Victoria Greene, founding partner and chief investment officer at G Squared Private Wealth, told Bloomberg, referring to Bitcoin. "Is it offsetting inflation, is it holding value, is it an investment you just want it to go up, or is it an actual currency you want to use to buy things?"

Additionally, as we've seen with equities, crypto investors also may be tax-loss harvesting, in which they exit some of their losing positions to offset some of their capital gains taxes. The discovery of the omicron COVID-19 variant just before Thanksgiving has only added fuel to the flames over the last month. 

Now what

It has still been a good year for these crypto mining stocks aside from Bit Digital, which is down nearly 78% this month but had seen its stock shoot up right before 2021 started. It has also been a good year for Bitcoin, with the price rising more than 63% this year, despite seeing a lot of volatility.

I suspect crypto mining stocks will continue to trade in a correlated fashion with Bitcoin and the broader crypto market for the foreseeable future.

As for Bitcoin, it's always a hard prediction and it will be interesting to see how it reacts to market conditions and potential rate hikes next year. But I am not in fear of Bitcoin going away in the long term and would expect to see further adoption in our financial system going forward. Still, there will likely be continued volatility, so I would expect to see the same in crypto mining stocks as well.

Bram Berkowitz owns Bitcoin. The Motley Fool owns and recommends Bitcoin. The Motley Fool has a disclosure policy.

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