What happened

As of 1 p.m. ET today, Bitcoin (BTC 1.28%) is leading the march in the crypto sector upward, surging 4.6% higher over the past 24 hours. This move is a continuation of some strong performance for the world's largest cryptocurrency this week, which has gone from below $20,000 seven days ago to breaching the $23,000 mark in early afternoon trading today.

Aside from the obvious effects Bitcoin's move has had on other tokens, crypto-adjacent companies are also seeing tremendous upside today. Specifically, Bitcoin miners Bitfarms (BITF 1.27%) and Hut 8 Mining (HUT) have appreciated 16% and 10%, respectively, from yesterday's close. And Bitcoin mining equipment company Canaan (CAN 6.08%) has also caught a bid today, up 7.6% from yesterday's close.

So what

The price of Bitcoin is generally the "gold standard" in the crypto sector, upon which other token prices are denominated. Outside of U.S. dollars, investors often want to know how much Bitcoin it will cost to acquire another token. Thus, Bitcoin is often thought of as a unit of exchange for most investors in this realm.

For crypto-adjacent companies such as Bitcoin mining operations, however, the BTC-USD exchange rate is even more important. When the price of Bitcoin rises relative to the U.S. dollar (becomes more valuable), the mining revenue companies receive obviously increases. However, with many mining operations carrying debt on their balance sheet denominated in dollars, a widening spread in the exchange rate provides an opportunity for investors to gain even more leverage to upswings in the price of Bitcoin.

Thus, when the market is up, miners such as Bitfarms and Hut 8 will often see much more volatile moves higher. The opposite is also true, which has been very negative for these companies in this rather nasty bear market.

Now what

From here, Bitcoin miners and companies providing mining equipment to this sector will likely be viewed as higher-leverage tools for traders to play the price of Bitcoin. Given the fact that these stocks are publicly traded, it's not necessary for investors to set up a wallet or join an exchange. Rather, anyone with a brokerage account can participate in the swings of the crypto market via trading Bitcoin-adjacent stocks.

Aside from traders, long-term investors who are bullish on the outlook for Bitcoin may want to take a look at some beaten-down crypto miners at these levels. Indeed, it's important to keep today's rally in context. Despite rising 16% and 10%, respectively, from yesterday's close, Bitfarms and Hut 8 are still off more than 80% from their 52-week highs. Thus, an argument can be made that such a rally may only just be starting, should Bitcoin continue to move higher from here.

That said, like any crypto-related investment, higher volatility means higher risk of capital loss over time. Investors who bought Bitcoin or these Bitcoin-adjacent stocks near the peak can attest to how painful a sell-off can be. Thus, this sector is best reserved for investors with a long-term investing time horizon and a higher risk tolerance threshold.