What happened
The value of Bitcoin (BTC +0.52%) rose sharply over the weekend, and that led to a jump in crypto miners and related suppliers on Monday.
Early in trading, Bitfarms (BITF +1.54%) jumped as much as 15%, Hut 8 Mining (HUT +0.00%) rose 14.4%, Marathon Digital Holdings (MARA 1.23%) popped 14%, and Riot Platforms (RIOT +1.54%) surged 17.4%. Some of those gains were given back quickly, though, and at 1:15 p.m. ET shares were up 2.8%, 2.6%, 3.1%, and 7.8% respectively.
CRYPTO: BTC
Key Data Points
So what
Bitcoin miners and companies that make chips and products for mining are a leveraged play on the underlying cryptocurrency, and we're seeing that play out today. Bitcoin is up about 3.5% from market close on Friday to the time of writing, yet these stocks jumped significantly more than that.
The leveraged nature comes from their underlying operations. The cost of mining or making chips is relatively fixed for these companies, with revenue being variable depending on the value of Bitcoin. That leads to massive upside when revenue jumps, which is why we see jumps like today's.
What's interesting about the move in Bitcoin recently is the fact that it happened after the U.S. Congress agreed to a deal that would avert a government shutdown. Bitcoin is often seen as a hedge against fiat currencies or big governments, but in reality, events like a shutdown or debt ceiling breach have been negatives for Bitcoin, and the cryptocurrency's value has risen when agreements are reached.
In related news, we are seeing a slow opening of the crypto trading market for exchange-traded funds (ETFs). The SEC has begun allowing some Ethereum ETFs, which could lead to more crypto products from Bitcoin to smaller cryptocurrencies. Like it or not, the market is moving toward both more regulatory clarity and more available products for cryptocurrency investors and traders.
NASDAQ: RIOT
Key Data Points
Now what
It's not clear that the bounce in Bitcoin's value over the weekend will last, because it's very speculative. The cryptocurrency has already given back a portion of its gains and is currently trading at around $28,070. History tells us that the averted shutdown-related pop will be given back over time.
The more important answers about crypto's future will come from Congress as it answers regulatory questions about the use of Bitcoin and other cryptocurrencies for payments and asset ownership. In the last few weeks, we have seen Singapore move ahead with a more open regulatory system, and other countries are doing the same. This could put pressure on the U.S. to answer regulatory questions as well.
Long-term, the crypto industry is moving in the right direction as it becomes more of an infrastructure layer in the global payment system, rather than a speculative asset. But that transition will take time. Bitcoin's miners will likely continue to be volatile as Bitcoin's price fluctuates, but if crypto continues to take bigger steps toward usage for payments, that would be good news for Bitcoin and miners.
