What happened
Shares of several crypto stocks rose today after reporting earnings results and as closely monitored inflation data continued to come in soft, suggesting that inflation could be peaking.
Shares of the digital asset platform and marketplace Bakkt Holdings (BKKT -10.13%) traded more than 12% higher at 10:50 a.m. ET today. Shares of the Bitcoin-miner Marathon Digital Holdings (MARA -1.80%) traded roughly 8% higher, and shares of the miner Hut 8 Mining Corp (HUT) traded nearly 15% higher.
So what
Yesterday, new data for the Consumer Price Index (CPI), which tracks prices on a range of consumer goods and services, showed that the CPI grew 8.5% on a year-over-year basis in July, less than economists had been forecasting. Furthermore, the CPI did not grow at all from June.
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Today, new data for the Producer Price Index (PPI), which tracks the prices for lots of products used for manufacturing, showed that the PPI fell 0.5% in July from June, marking the first monthly decline since April of 2020. Economists had been expecting a monthly rise of 0.2%.
Inflation peaking would be very good for Bitcoin and the crypto industry because rising interest rates have crushed riskier assets this year and easing inflation may enable the Federal Reserve to slow its pace of rate hikes.
On top of this, Bakkt, Marathon Digital, and Hut 8 Mining all reported earnings recently. Bakkt reported a net loss of $0.05 per share in the second quarter on total revenue of $13.6 million. Earnings beat analyst estimates easily, while revenue came up just short. Furthermore, Bakkt lowered its guidance for the full year and now expects to generate between $57 million and $62 million of revenue. Prior guidance had been for $60 million to $80 million.
Hut 8 Mining Corp reported a net loss of $0.49 on revenue of nearly $44 million, both in Canadian dollars. The company also mined 946 Bitcoin tokens in the quarter, bringing its total in the first half of the year up to 1,888 tokens, which is up nearly 73% year over year. However, the company also withdrew its previous guidance for revenue growth in its high-performance computing business, which is separate from its Bitcoin-mining operations and accounts for about 10% of revenue.
Marathon Digital reported earnings on Aug. 8, delivering a net loss of $1.75 per share on total revenue of nearly $25 million. The company missed expectations in the quarter after taking a $128 million impairment on its Bitcoin holdings.
Now what
The weak second-quarter earnings results from these three crypto companies are not a huge surprise considering how low crypto prices dropped in the quarter.
The stocks are all rising today thanks to the soft inflation data, which suggests inflation could be peaking and leading to a rise in the price of Bitcoin. There may be value in buying some of these crypto miners, which have been heavily beaten down this year, but their stocks really just move with the price of Bitcoin.
I like what Bakkt is doing by creating a marketplace that further ingrains Bitcoin and crypto in the regular economy, but the company still needs to improve its financials.
Editor's note: This article has been corrected to reflect the fact that Hut 8 Mining Corp. did not withdraw guidance across its business, but only for revenue growth in its high-performance computing business.
