What happened
Cryptocurrency mining company Canaan (CAN 1.86%) is one of the big movers in the market today. Its shares have plummeted 20% over the past 24 hours as of 1 p.m. ET, marking the largest move in the crypto mining sector, which is itself down big today.
NASDAQ: CAN
Key Data Points
News that crypto miner Hive Blockchain Technologies made a large purchase of application-specific integrated circuit chips from Intel has driven most of this move. Previously, Hive had purchased its crypto mining machines from Canaan, which is a large Chinese producer of integrated circuits and other mining hardware. However, the fact that this large order went to U.S.-based Intel has some investors considering how the competitive dynamics of this industry may be shifting.
Image source: Getty Images.
So what
Crypto mining continues to be a hot-button topic for investors. The proof-of-work consensus mechanism, which requires high-powered computers to solve complex problems to validate and secure blockchain networks, is extremely energy intensive. From a regulatory standpoint, there are already significant headwinds for this sector. Regulators in a number of jurisdictions have sought to push against this less environmentally friendly aspect of the crypto market.
However, individual crypto mining stocks offer their own set of catalysts and challenges that investors ought to consider. Given the dramatic increase in crypto mining in the U.S., and the state of U.S.-China relations, the outlook for Canaan on the release of this news appears to be deteriorating. How market share in this space evolves is something investors in this sector will continue to watch. But for now, Canaan's growth outlook appears to be less than stellar.
Now what
Moving forward, investors considering Canaan may be forced to pay closer attention to where crypto mining machines are sourced. Should more U.S. miners shift to domestically sourced hardware, Canaan's sell-off could be indicative of more pain ahead.
On the other hand, perhaps today's sell-off is overdone. Investors looking for value in this sector certainly have much more compelling valuations to jump on. Thus, maybe there's a value angle to be had with Canaan at these levels.
Personally, I think this sector is one that's too volatile for my own liking. For Canaan in particular, I think the jury is still out on how this hardware producer will perform in the quarters to come. Accordingly, I'm going to watch this stock from the sidelines for now.
