What happened
Positive momentum among higher-risk assets is prevailing today, with the Nasdaq and cryptocurrency market outperforming most other indexes in today's session.
However, the moves seen in various crypto miners today has been staggering. As of 12 p.m. ET, Riot Platforms (RIOT 3.17%), Bitfarms (BITF +0.68%), TeraWulf (WULF 0.03%), and Hut 8 Mining (HUT +0.00%) have appreciated 12.2%, 8.2%, 6.3%, and 5.8%, respectively, over the past 24 hours.
NASDAQ: RIOT
Key Data Points
Some of these gains appear to be driven from various macro forces, including a debt ceiling bill that would raise the debt ceiling for another two years and negate the potential fallout of an immediate government default on its debt.
However, other factors specific to the crypto mining sector also appear to be at play with today's rise among crypto miners. Network congestion on the Bitcoin network, where most crypto miners earn the vast majority of their revenue, continues to remain high. This has pushed a narrative that higher fees for crypto miners could be on the horizon.
Additionally, Bitcoin mining stocks have been among the most shorted in the market, mainly due to the fact that these stocks are much easier to short than the underlying cryptocurrency. The fact that some short positions may be taken off in the wake of this news appears to be bolstering crypto miners to a greater extent today.
So what
Let's not diminish the importance of this voting process on the proposed plan to suspend the debt ceiling. All risk assets should theoretically get a boost from this major potential headwind being lifted. Accordingly, it's no surprise to see some of the more speculative assets in the market receive a boost from today's news.
The price of Bitcoin, upon which the profitability of crypto miners is based, is the most important factor investors consider when adjusting their models for these stocks. Thus, some price stability (Bitcoin has generally traded within a range of $25,000 to $30,000 for some time) may provide some better visibility to future earnings, at least over the next 12 to 24 months. If markets settle down, and Bitcoin remains stable, such an environment should theoretically bode well for these crypto-adjacent assets.
Now what
Some significant uncertainty still remains with respect to whether this upcoming debt ceiling bill will pass. Both the House and Senate will need to approve the bill, and voting is set to begin shortly. Thus, it's possible that any sort of setback on this front could set risk assets back in short order.
However, assuming things move forward as expected, the existing congestion on the Bitcoin network remains, and short-sellers remain cautious with respect to their positions, crypto miners are among the higher-risk, higher-upside bets investors seem to like right now. This is a group of stocks I think investors should be paying close attention to.
