Why Bitcoin Mining Stocks Jumped on Monday

What happened

The value of Bitcoin mining related stocks jumped on Monday as the price of Bitcoin itself shot higher. At 3:30 p.m. ET the value of Bitcoin was up 7.3% over the last 24 hours and 17.4% over the past week.

That's pushed shares of miners Riot Blockchain (NASDAQ: RIOT) as much as 15% higher and 10.3% up as of this writing. Competitor Hut 8 Mining (NASDAQ: HUT) was up as much as 13.6% and is now up 6.6%. And computing supplier Canaan (NASDAQ: CAN) was up 11.7% at its high and is currently 5.5% higher for the day.

Digital image of a mine on a computer chip.

Image source: Getty Images.

So what

Miners are clearly set to make more money as the price of Bitcoin rises because their costs don't go up significantly and their revenue will. This is much like the commodity of a physical materials miner going up.

The other leverage they have is that miners tend to have significant Bitcoin assets on their balance sheet, which will also rise in value on a day like today.

To put the assets they hold into perspective, at the end of 2021 Riot Blockchain had 4,884 bitcoins on the balance sheet and Hut 8 Mining was holding 5,518 bitcoins. These assets are appreciating with the price of Bitcoin and are certainly helping stock values today.

Canaan is the one outlier from this list, holding just 70.5 bitcoins and generating its revenue from selling mining machines to operators. It may not have the same direct impact as miners do from the rise in Bitcoin, but this is a rising-tides-lift-all-boats kind of move for Canaan.

Now what

Today's move across the cryptocurrency market wasn't driven by any specific piece of news, but rather a general uptick in bullishness for cryptocurrencies. There were reports that the U.K. is set to announce some cryptocurrency regulations soon and they're expected to be relatively pro-crypto in nature. If that's true, it'll be good for crypto values and digital assets, continuing a positive executive order from the White House earlier this month.

While volatility will continue to be the standard for the crypto industry, I think it's clear that we're heading to a more steady state for the industry. Investors and developers are getting more comfortable that crushing regulations won't come from developed countries and that will likely lead to even more investment.

I think long-term these trends are bullish for the crypto industry, but with that said I would expect extreme volatility to continue, so don't expect values to go straight up like they have over the past week, because they can reverse course just as quickly.

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Travis Hoium has no position in any of the stocks mentioned. The Motley Fool owns and recommends Bitcoin. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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