The price of Bitcoin (BTC 1.48%) recovered on Tuesday as investors swung back to a risk-on trade. Markets have feared growing trade tensions between the U.S. and China, and that pushed stocks lower on Monday. Investors looking for a "safe" alternative have pushed gold and Bitcoin higher, with the biggest cryptocurrency jumping 5.2% in the last 24 hours as of 2:10 p.m. ET today.
Crypto miners followed the move with TeraWulf (WULF 0.84%) jumping as much as 20.9%, Riot Platforms (RIOT 0.54%) rising 14.3%, and MARA Holdings (MARA 1.34%) climbing 12.2%. The stocks are currently up 17.6%, 12.1%, and 11.1% respectively.
Bitcoin's jump and its role in global finance
The strange thing about the moves in the market recently is how abnormal they are. Usually, when stocks drop, it's because investors are fleeing to the safety of Treasuries, but Treasuries have fallen as well.
One potential place to store value is in gold and Bitcoin, which is arguably the best use case for the crypto today. That's helped push it 8.3% higher since midday on Sunday.
Why Bitcoin miners are surging
Companies that mine Bitcoin have two ways to benefit from the rising price of the cryptocurrency. First, their revenue and return on investment are in the form of the token. So, if the price rises, their revenue goes up and they become more profitable.
Most companies have also begun storing Bitcoin on their balance sheets. MARA Holdings said it now holds over 46,000 bitcoins, and Riot now has 19,223. TeraWulf has less held on the balance sheet and only disclosed $274.5 million in cash, equivalents, and Bitcoin at the end of the fourth quarter of 2024.
The leveraged nature of Bitcoin miners can be good or bad for investors. If it rises, miners will generate a great return, but if it drops, it could lead to significant losses.
Where does crypto go from here?
While markets are worried about what happens with the economy and where they have found safety, the U.S. Securities and Exchange Commission has had a change of leadership with Paul Atkins being sworn in today. Atkins is seen as being crypto-friendly, a contrast to Gary Gensler, who didn't set clear rules and didn't have many fans in the crypto industry.
But the new SEC chair may have more of an impact outside of Bitcoin, where there's more utility and disruption. I don't think the crypto's fortunes will be changed by the SEC. At best, it will be a substitute for gold, not a more efficient form of money.
What investors need to realize is that it hasn't been a good hedge against the dollar, inflation rates, or the market. In fact, Bitcoin fell when the market fell in 2022, just as inflation was rising. It trades more like a traditional risky asset rather than gold, which is seen as more of a hedge.
With that in mind, I think this pop in Bitcoin and its miners may be overdone if the economy is headed south in 2025. The crypto isn't likely to be spared if the market sell-off continues.
