As of 8 a.m. ET, top cryptocurrency miners Cleanspark (CLSK -5.54%), Hut 8 Mining (HUT -4.63%), and Bit Mining (BTCM -7.09%) have seen declines of 12.8%, 12.7%, and 10.1% since Friday's close.
These declines essentially mirror the decline in the price of Bitcoin, which dropped approximately 12% over the past week. Because crypto miners are price takers in a volatile crypto market, their valuations tend to correlate very highly to the moves in the value of Bitcoin.
Some of this week's move has been the result of geopolitical instability in key Bitcoin mining markets. Specifically, in Kazakshtan, which currently is the second-largest Bitcoin mining market outside the U.S., political protests demanding action on surging energy costs has many concerned that increased regulatory headwinds could prevail for the crypto mining space.
Despite Bitcoin's dip toward the $42,000 level, a number of analysts and market pundits remain bullish on the outlook for specific crypto miners. Even at this level, profitability for many miners remains robust. Thus, from a fundamentals perspective, there's an argument that this is yet another dip worth buying.
Additionally, the geopolitical concerns seen in markets such as Kazakhstan, which are now considering the impact crypto mining has on their power grid, may be viewed positively at a high level by investors in crypto miners. If Kazakhstan's hash rate (which measures the total computing power used in the Bitcoin mining process) drops, crypto miners positioned in other countries, such as the U.S., could benefit. One region's loss is another's gain, as we've seen play out in China via the CCP's ban on crypto mining.
The current macro environment for crypto miners remains a fluid one, and there are many factors investors should consider when looking at individual crypto miners. Regulatory risks are real, as are volatility-related risks tied to the price of Bitcoin. Crypto miners can prove to be much more volatile investments over the short term than the underlying cryptocurrencies mined.
However, over the longer term, the value of Bitcoin miners tracks the price of Bitcoin well. Those looking for a publicly traded option to play the crypto space may certainly view crypto miners as a means of gaining exposure to this sector.
Ultimately, a bet on any of these crypto miners is a bet that 2022 will be another great year for Bitcoin and the crypto market in general. Those taking either side of this trade ought to be aware of the risks. It's likely to be another volatile year for crypto miners, with the first week of this year providing what could be a great illustration of what's in store.