Why Bitcoin Miners Cratered This Week

The halving did not have the impact many investors had hoped for this week, as the price of Bitcoin (CRYPTO: BTC) was down 3.4% over the past seven days as of 2:30 PM ET. The 4.7% recovery in the last 24 hours saved the sector from an even worse collapse.

According to data provided by S&P Global Market Intelligence, Riot Platforms (NASDAQ:RIOT) fell as much as 13.8% for the week, while Marathon Digital (NASDAQ:MARA) lost 11.8% and Cleanspark (NASDAQ:CLSK) lost 16.2%. lived. . As I write, stocks are down 12.5%, 10.1%, and 15.2%.

Bitcoin’s drivers are not what you think

No matter how much the crypto industry is talked about as an alternative to traditional finance, the same factors that drive growth stocks will drive Bitcoin. The biggest news this week was the warmer-than-expected inflation report at the beginning of the week and the Fed’s decision to keep interest rates steady on Thursday.

The Fed is worried that inflation will rise again. If rates remain high, it could cool the economy and leave less funds for people to buy discretionary or speculative assets like Bitcoin.

Bullish expectations for the impact of exchange-traded funds (ETFs) on the Bitcoin market are also waning as launches in Hong Kong have not been met with much demand and US fund flows have slowed.

Bitcoin’s huge impact on mining operations

Miners are bearing the brunt of this week’s move for a few reasons. First, companies generate revenue from Bitcoin, so when the price goes up it’s good for business, when it goes down revenue and margins go down.

The second big impact is that many of these companies hold Bitcoin on their balance sheets, which increases the impact. This may be great when Bitcoin is rising, but when it is falling it creates a huge impact.

Following the halving, the reward for Bitcoin mining also dropped and many investors thought this would lead to an increase in price. But that hasn’t happened yet, and if it doesn’t happen we will see margin pressure for Bitcoin miners.

Where do miners go from here?

Miners haven’t been very profitable, especially when Bitcoin crashed in 2022 and early 2023. As you can see below, this is reversing, but this is partly due to the impact of mark-to-market accounting that Bitcoin already has on their balance sheets.

RIOT Net Revenue (TTM) Table

What we will have to watch in the future is whether these companies can make money with half of the Bitcoin reward. Costs will rise and margins will likely fall. But it became one of the bull cases where the survivors will have more market share and benefit from higher Bitcoin prices.

The story continues

If Bitcoin does not rise soon, I fear that miners’ financial situation will become even more difficult. They are already facing higher electricity costs and will now feel a pinch from the Bitcoin price and the halving. That’s why I’m staying away from these stocks today.

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

Why Did Bitcoin Miners Crater This Week? Originally published by The Motley Fool.