- Marathon Digital (MARA) shares have crashed by 31% in 2024.
- Hut 8 Mining and Riot Platforms have done much worse.
- Bitcoin has crashed from $49k to $40,000 after the ETF approval.
Bitcoin mining stocks are not doing well even after the decision by the Securities and Exchange Commission (SEC) to approve a spot Bitcoin ETF last week. Marathon Digital (MARA) stock has crashed by 31% this year, erasing some of the gains it made in 2023.
Hut 8 Mining (HUT) has been the worst-performing mining stocks this year as it crashed by more than 46%. It has done so badly that it has now plunged by almost 10% in the past 12 months.
Riot Platforms (RIOT), one of the biggest companies in the industry, has crashed by 33% this year so far. It has still surged by more than 80% in the past year, making it one of the best-performing Bitcoin mining stocks. Other companies in the industry like Cipher Mining and Bit Brother have also crashed.
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Bitcoin mining companies have plunged because of the recent Bitcoin price action. BTC initially surged to over $49,000 after the SEC approved 11 spot ETFs, in one of the most important decisions in the industry.
This surge was short-lived as Bitcoin has now been in a downward trend. It was trading at $40,800 on Friday and there is a risk that it will drop below $40,000. This decline is mostly because the SEC decision was already priced in by market participants. As such, it is going through a sell-the-news situation as investors wait for the next catalyst.
Bitcoin mining stocks have a close correlation with BTC in that they do well when it is rising and then plunge harder when it is falling. For example, HUT, MARA, and RIOT shares surged by more than 300% in 2023 as Bitcoin rose by over 150%.
These mining companies are also slipping because of the ongoing macro events globally. The crisis in the Middle East is escalating, leading to concerns that inflation will continue rising. This, in turn, will lead to more tightening by central banks like the Federal Reserve.
In most cases, companies like Hut 8 Mining and Marathon Digital do well when the Fed is doing the opposite. In 2023, they jumped as hopes emerged that the Federal Reserve will start cutting rates this year.
Now, the question is whether it makes sense to buy the dip in Bitcoin mining stocks. Historically, it is common for Bitcoin to drop sharply after hitting a key level (in this case $49,000) or after a major headline.
For example, Bitcoin surged after the SEC approved the BITO ETF in 2021 and then dipped shortly afterward. Also, Bitcoin halving is coming in April and it could lead to more Bitcoin demand. BTC tends to rally ahead of that event.
Therefore, I believe that these companies will recover as this volatility eases in the coming weeks. However, the key risk to watch is their upcoming earnings. Riot Platforms will publish its results on March 3rd while Mara will do so on March 15th.
