What happened
Following impressive moves yesterday, shares of various cryptocurrency miners are plunging today. As of 2:30 p.m. ET, shares of Riot Platforms (RIOT -1.49%), Cipher Mining (CIFR 1.58%), and CleanSpark (CLSK -1.59%) are down 9%, 10.7%, and 11.3%, respectively, over the past 24 hours.
As I reported yesterday, crypto miners were on the move in the opposite direction yesterday, with similar gains to the upside. Thus, today's move in these Bitcoin (BTC -1.25%) miners mean that these stocks have given up essentially the entirety of their upside moves in yesterday's session.
The price of Bitcoin has a lot to do with this move, with Bitcoin losing approximately 3.3% over the past 24 hours, at the time of writing. However, other factors, such as Bitcoin's hash rate (the computing power required to process blocks), suggests strength in the crypto mining sector, leading to optimistic views of this space over the medium term.
So what
Bitcoin mining is an inherently difficult sector to understand. Massive computing power is required to solve complex mathematical problems, in a bid to validate transactions and secure the Bitcoin network. Thus, while plenty of data has been provided with respect to the overall health of the Bitcoin network (which appears to be just fine, according to recent data), how investors interpret this data can clearly shift on a day-to-day basis.
Today's move in these prominent crypto miners appears to be more tied to Bitcoin's price action than anything else. Right now, there's clearly a fight among bulls and bears over securing the $30,000 level. With Bitcoin moving roughly $1,000 lower since yesterday, a $29,250 price isn't as enticing as one with a 3 in front. Thus, these stocks appear to remain highly correlated ways to play Bitcoin's surges or declines, often increasing or declining to a greater extent than the cryptocurrency itself.
Now what
As far as crypto investing is concerned, I think there's a valid argument that can be made to simply buy a given cryptocurrency, rather than looking to get fancy with buying adjacent assets that may be more volatile. With respect to Bitcoin, I think this is the case. It's up 80% this year, and many crypto miners are up by a greater degree. However, these higher volatility characteristics have also played out to the downside, meaning when times are bad, they're really bad for this group of stocks. Investors just need to keep this in mind before diving into any of these high-momentum stocks right now.
