On this Jan. 19 episode of "The Crypto Show" on Backstage Pass, Fool.com contributors Chris MacDonald and Jon Quast discussed why geopolitical risk is one that should certainly not be avoided by investors interested in cryptocurrency miners, particularly niche miners such as Bit Mining (BTCM 35.68%).
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Jon Quast: Let's talk about Bit Mining. This is a stock, it's been public for a while, BTCM, plunging because of news out of Kazakhstan and you covered this yesterday.
Chris MacDonald: Yes. Just to go back to that previously, Bit Digital (NASDAQ: BTBT), I think is based in the U.S., but Bit Mining, so these are two that often conflate with each other.
Bit Mining is the one that has moved out of China to Kazakhstan. I wrote this piece yesterday on it and the fact that it plunged by a third in a single day. This goes back to what you were saying about the 20% inclines or declines being considered normal. In this case, there was a specific catalyst that drove this move for Bit Mining.
As a lot of viewers may know, Kazakhstan is in a state of political turmoil right now over energy prices, and with crypto mining being such a big deal, Kazakhstan did have, I believe, the second largest market share for crypto mining in the world until recently.
With all of that energy consumption, it put a lot of stress on the power grid. Essentially, there were outages, and the government had to step-in, and essentially shut down the internet for periods of time. There's been blackouts, which have affected crypto miners such as Bit Mining.
Quast: It wasn't really popular.
MacDonald: [laughs] No, not at all. [laughs] They came out and said, ''We're not leaving Kazakhstan, we're going to stay here.'' There's that execution risk that you mentioned from a business standpoint of, where you are going to set up your operations? They've already made a big shift out of China, so shifting again, maybe not as attractive to them, but investors took that as, well, there's just too much risk right now in this particular geography, so we're going to look at other miners and maybe rotate out of this one. There's a lot of interesting geopolitical stuff.
There's the crypto underlying risk with Bitcoin prices, there's execution risks with these companies, and there's also geopolitical risk on top. When you layer that all together, this volatility is something that investors can expect with these miners.
Quast: Yeah. To your point, this is still a developing story. This is all in 2022, that this news with Kazakhstan has been coming out and developing.
