What happened
Shares of several crypto mining stocks surged this week thanks to promising new economic data and as institutional interest picks up in the space.
Shares of Riot Platforms (RIOT -1.49%) traded roughly 27% higher for the week as of 12:28 p.m. ET today, according to data provided by S&P Global Market Intelligence. Meanwhile, shares of TeraWulf (WULF -0.80%) had blasted more than 40% higher, while shares of Marathon Digital Holdings (MARA 2.21%) were up nearly 20%.
So what
Earlier this week, the U.S. Bureau of Labor Statistics released the latest reading for the Consumer Price Index (CPI), which tracks the prices on a market basket of consumer goods and services and is a key way investors gauge inflation. The CPI in June rose 0.2% and was up 3% year over year, which is better than economists had been expecting.
Image source: Getty Images.
The 3% year-over-year number is the softest level of inflation seen since March 2021 and core inflation excluding food and energy also slowed, supporting the narrative that the Federal Reserve is making progress in its war with inflation and may possibly avoid a hard landing, although that still remains to be seen.
The quicker the Fed can get inflation under control, the quicker the agency can stop raising interest rates, which is detrimental to riskier assets like cryptocurrencies and crypto-related stocks.
In other news, the crypto miners continue to garner more interest from Wall Street after a terrific year so far, in which Riot is up nearly 483%, TeraWulf is up more than 410%, and Marathon is up roughly 454%. Recently, the large asset manager Vanguard increased its stake in both Riot and Marathon to about 10% of each company.
TeraWulf also saw its shares surge this week after Northland Capital Markets analyst Mike Grondahl initiated coverage of the company with an outperform rating. Grondahl sees five reasons that TeraWulf is a buy:
- A more bullish backdrop for cryptocurrencies
- More capacity and the potential for strategic acquisitions
- An eco-friendly strategy based on inexpensive green energy
- A growing total addressable market
- Solid financials including revenue growth and an attractive valuation
The note comes after TeraWulf announced not long ago that it had increased its hash rate, or computing power, by 25% month over month in June.
Now what
The inflation report is certainly bullish for the crypto industry. While there may be another rate hike at the Fed's upcoming meeting this month, the good news is that inflation is coming down and the Fed has been saying for several months that it would be watching the data closely.
Additionally, more institutional interest continues to be a catalyst for cryptocurrencies and crypto-related stocks. The sector has been red-hot since BlackRock and other large firms announced plans to launch a spot Bitcoin exchange-traded (ETF) fund.
I tend to prefer owning Bitcoin over other crypto-related stocks because it is less volatile, but if you are bullish on Bitcoin then owning the crypto miners is certainly reasonable, given this is the asset they mine and hold. Just remember that during a crypto winter, these stocks can really take a hit, even harder than Bitcoin.
