Bitcoin’s swift rally over the past few weeks has helped it erase its losses for the year, but equity investors have yet to pile back into crypto-related stocks with the same conviction. Since hitting a six-month low in late January, Bitcoin prices have surged more than 30 percent including a 13 percent jump in March.
Meanwhile, the NYSE FactSet Global Blockchain Technologies Index, which tracks 35 stocks with exposure to the cryptocurrency space, remains 13 percent lower for 2022.
Crypto mining firms have been among the hardest hit by Bitcoin’s roughly 50 percent slide earlier this year from a record high in November. Shares of Hut 8 Mining Corp., Voyager Digital Ltd., and Bit Digital Inc. have all fallen 25 percent or more year to date, while Marathon Digital Holdings Inc. is down about 6.8 percent.
On Wednesday alone, Stronghold Digital Mining Inc. sank 33 percent to a record low after its fourth-quarter earnings missed estimates and the company warned that its 2022 hash rate target – a measure of how quickly it can mine – was no longer achievable, citing operational headwinds.
Steep and sudden price swings are not uncommon in the crypto space, but sharp declines in value, like the one seen in Bitcoin to begin the year, still create headaches for stocks with heavy exposure.
For miners, any plunge in crypto prices begins to compress their typically robust profit margins. While Bitcoin’s recent rebound has eased some of those pressures, the runup in energy prices over the past month as a result of the war in Ukraine is likely to drive up operating expenses for the miners that need to consume large amounts of electricity in order to run their mining rigs.
